featured-healthIssue 11

It’s Never Too Early to Start College Savings

by Jacqui D. Sinarle

When it comes to saving for your child’s college education, there’s no time like the present to begin.

That’s because college costs are rising and making small, consistent contributions to a savings fund can be less painful than facing an overwhelming tuition bill or the lingering pain of a student loan.

“Families should start saving as soon as they can after the child is born,” advises Lynn Telford-Sahl, certified money coach and author. “Even $25 a month per child for 18 years is better than waiting until the child is older.”

Unfortunately, college savings are not at the top of everyone’s minds. “According to Paul O’Donnell of CNBC, only 48% of families with college-bound children have started to save for college, and that number has dropped since 1997 when 56% were saving,” Telford-Sahl says.

As with many long-term goals, the most important step is getting started.

“Projecting ahead to the cost of college when your child is ready is a bit tricky, but we can expect the costs will continue to grow,” Telford-Sahl says. “One calculator for determining how much a family needs to save for a 1-year-old child with 17 years until college at a four-year degree estimates that the cost of college will be $246,000 and savings would need to be $581 per month.”

Many parents save for college with a 529 Plan.

“A 529 Plan is a college savings plan that is tax-deferred upon withdrawal,” Telford-Sahl explains. “It is a savings account that acts like a mutual fund because it’s tied to the stock market and can earn 3 to 10% annually when the market is going up.”

Because 529 funds can only be used for college, some financial planners prefer more flexible insurance vehicles that can also be used for expenses like trade school or a car upon graduation.

“Too few people budget, and I understand—we equate budgets with restriction and no fun, and it’s easy to get caught up in current life and the expenses of raising children,” Telford-Sahl says. “But by starting small you can make great strides toward saving for your child’s college education.”

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