Did you know that the class of 2018 graduated with an average student loan debt of $29,800? With this in mind, it becomes evidently crucial to start strategizing on how to save for college and evaluate the true worth of higher education. It is a common question faced by many parents and prospective students alike: Is college worth the cost?
In the following deep-dive exposition, we will delve into robust college savings strategies to protect your pocket and carefully evaluate whether the cost and effort you put in are indeed worthwhile. So join us as we navigate the intricacies of higher education financing, because being prepared financially is just as important as getting those grades.
Understanding How to Save for College: It's Never Too Early To Start
Often, when people think about saving for college, the focus is on the student – but it doesn’t have to be this way. In reality, parents, guardians, and other family members can all play a fundamental part in backing up a student's journey to higher education. And the sooner one starts, the better.
Consider this: A College Savings Plan started when a child is born can significantly reduce the burden later. It allows more time for the contributions to grow through the power of compound interest. Additionally, it eases the stress of dealing with hefty tuition fees during college years, thus allowing the student to concentrate more on their studies.
A Closer Look at College Savings Strategies
When it comes to college savings strategies, there is no one-size-fits-all. A strategy that might work for one family might not necessarily work for another. The secret lies in tailoring your savings plan to accommodate your specific needs, financial position, and your child’s projected academic path.
That being said, there are some common plans that tend to resonate with most people, and their effectiveness is rooted in their structure and nature. These plans include 529 plans, Coverdell Education Savings Account (ESA), Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) custodial accounts, and saving in Roth IRA. Let’s break down each of these strategies:
In the whirlwind of college approximations, it's important to wisely strategize your savings to cushion both you and your child from soaring higher education costs. From understanding the real value of higher education to effectively leveraging saving strategies, let's dive deeper into this topic.
Calculating the Worth of Higher Education
The perceived value of higher education is quite subjective and may vary from individual to individual. However, it’s indispensable to foray into uncharted territories, analyse several aspects and ask certain questions. Is the chosen field of study likely to lead to a lucrative and stable career? Will your child be acquiring significant networking opportunities, specific skills, and hands-on training? Will it lead to personal growth and broad intellectual learning? Is there adequate return on investment in terms of higher income and greater employability?
Higher education will make more sense if it aligns with your child’s long-term career goals and choose an institution which is endowed with opportunities for fostering skill-set development in your child’s area of interest. It’s crucial to put these factors into the equation to evaluate whether the high cost of tertiary education in the name of attaining a degree justify the incurred expenses.
Money-saving Strategies for College
You might be feeling overwhelmed about how to start saving, but here are some strategies that can help.
1. Set up a 529 plan: A 529 plan is an education savings plan operated by a state or educational institution that provides tax advantages and potentially other incentives to make it easier to save for college. The best part about this account is that the earnings on your investments are not subjected to federal tax and generally not to state tax when used for the qualified education expenses of the designated beneficiary.
2. Apply for Scholarships: Scholarships are a great source of free money for college. Besides checking with the college, look for local organizations, businesses, and foundations that offer scholarships based on varied criteria. The earlier you start your scholarship search the more options you will have.
3. Consider Community or Online College for the first two years: Attending a community college or enrolling for an online course with a public university for the initial years can significantly cut down the cost. After two years, students can transfer to another college to complete their bachelor’s degree.
4: Encourage your child to work part-time: Part-time jobs not only help with the financial side but also allow students to gain valuable work experience. Plus, it can actually enhance their time management skills and increase their sense of responsibility.
Remember, when it comes to saving for college, the earlier you start, the better. Nurturing a college savings habit will not only secure a reliable educational future for your child but will also prevent you from the inevitable financial burden.