Parents: Why You Should Start Saving For College Now

Thirty thousand dollars is a lot of money. With that much cash, you could buy a brand new Nissan 370Z or a 1.70ct Signature Ideal Diamond engagement ring.  That amount of money could also get you one year of tuition, fees, books, a cramped dorm room, meals and health insurance at the University of Massachusetts Amherst – for an in-state resident. Multiply that figure times four years and you’re looking at $120,000+ to get a college degree.

Pretty scary right? Well, $30K for in-state tuition at a public school actually isn’t that terrible. Tuition and fees at Wellesley College are $46,836 without financial aid. With room, board, and other fees combined, total cost of attendance is estimated at $63,390! Go all four years and you’re looking at north of $250,000 for a degree.

These prices assume that you’re going to college this fall. College costs have actually been rising much higher and faster than general consumer inflation, so if we assume that the 6% education inflation rate continues to hold, in 18 years, that $63,390 per year at Wellesley will swell to $180,936 or GULP, $723,746 for a four year degree.

Once you stop your uncontrollable, depressing laugh, read on, it’s not hopeless!!

While just about every article, calculator and seminar you’ll read, use or attend will provide some further illustration of the exorbitant cost of college, don’t interpret that as “the costs are so high, it’s not even worth saving for.” Yes, the costs of college are high and we have to be real about that, but there are some excellent strategies that are worth paying attention to that will make you look like an A+ student.

First, start saving as early as possible, potentially even before your child or grandchild is born. Just like saving for retirement, the sooner you start saving the more you can take advantage of the power of compounding. It’s never too late to start, but if you start when they are in Kindergarten, you’ve already lost 1/3 of the saving timeline.

Second, for most families, opening a tax advantaged 529 College Savings Account is probably a good idea. You get tax deferred growth of your deposits and tax free withdrawals when used for education expenses and you have the flexibility to change the beneficiary. Tax considerations and financial aid formulas can always change and there may be unique circumstances where a 529 isn’t the best choice, but for many, it’s a great option.

Third, you can build college savings and rebates through affinity programs. Fidelity Investments offers a 2% Cash Towards College credit card and the Upromise network has rebates on over 850 merchants, many of which you may use already.

Lastly, be sure to align your savings and investments to the appropriate level of risk. If you were heading to college in the fall of 2008 and didn’t protect your savings, you may have seen a precipitous dip just before you needed the money. Don’t let that happen to you. Make sure your investment glide path aligns with your willingness and ability to take risk.

You can do it! Just get started and if you’d like to discuss investments or strategies in more detail, we would be happy to help.

Jason Haviland, CFA, CEBS, PMP is the President and Founder of J. Bradford Investment Management in Nashua, NH. For more information, please visit
www.jbradfordinvestments.com/about

PLEASE REMEMBER:

– INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.

– PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

– THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.

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