College is expensive, and saving for it in the midst of paying for diapers, piano lessons, and medical bills is a daunting task. If you're like many parents, when it comes to college savings, it can be difficult to know where to start. Here are some common questions parents have when considering saving for college:
How Much Will College Really Cost, and How Much Do I Need to Save?
There's no way to predict what political and social changes are in store for higher education or to know the exact future costs of college, but we can make reasonable guesses based on current costs and inflation trends. Try this College Savings Calculator to get a sense of future costs for a specific school and how much you'd need to save to help fund your kids' education.
When Should I Start Saving?
As with any investment, time is a major factor in reaching your goal, and the sooner you can start, the better off you'll be.
Take a look at what a difference a few years can make if you start saving $200 a month and earn an average of 8% return:
How Should I Prioritize Saving for College and Saving for Retirement?
You need to prioritize your retirement savings ahead of your kids' college savings. There are no loans or financial aid for retirement, and nobody wins if you end up depending on your children as you age.
You are not a bad parent if you don't pay for your child's college education, and they will likely value their education more if they contribute to the cost in some way. Be sure to discuss this with your child well before they are leaving the house, and set clear expectations for what you can and cannot afford to help them with.
What Happens If My Kid Doesn't Go to College?
You're allowed to change the beneficiary on most college savings plans. So, if your firstborn doesn't end up going to college, you can transfer the account to your other kids, another family member, or even yourself.
Keep in mind that the definition of "college" is pretty broad and includes community college and vocational training.
My Parents are Asking About Christmas Gifts; Can They Contribute to the College Savings Fund?
Yes! Anyone can contribute to the College Savings Fund! In fact, this is something we highly recommend. Rather than getting another toy or outfit for junior, consider asking friends and family to contribute to their College Savings Fund instead. You'd be amazed at what those small gifts could turn into when college comes around.
How Do I Get Started?
The IRS allows certain tax advantages for college savings plans to help encourage families to start saving for college. Visit our post on Tax-Advantaged Ways to Save for College for a general overview. Talk with a financial advisor to determine what type of investment vehicle is suitable for you and your child.