5 Quick Lessons from National College Savings Month
September marked National College Savings Month, but here at Florida Prepaid, we’re still celebrating — and learning! As parents and grandparents, it’s always a good time to study up on saving for college. Unfortunately, there isn’t a class for that. But if you focus on these five quick lessons and act on them, you’ll be well on your way to a passing grade.
- Familiarize yourself with how much college costs. Just as it may pleasantly surprise you to discover how affordable two years of community college can be, the price tag of four years at a private university might take your breath away. To give you an idea, the average cost of in-state tuition and fees, and books and supplies, nationally for a state university is approximately $10,000, and if you plan to save for room and board, that could be another $10,000. So ahead and look that cost in the eye (and factor in the reality that costs will rise). Use your new knowledge to start your savings plan, so that the dreams you have for little Johnny’s higher education can become a reality.
- Time is a tool; use it. No matter how old your child is, there’s never going to be a better time to start saving for college than right now. And the earlier you save, the less you have to save each month to get to your goal. Studies show that simply opening a dedicated college savings fund, even with a small amount, encourages future contributions. It also encourages your child to attend college!
- Start researching the different kinds of college savings plans. A 529 Plan is like a college savings account but better, because earnings on the funds you contribute grow tax-free when used for qualified higher educational expenses. One of the great benefits of 529 Plans is that the Account Owner maintains control over the funds and is able to ensure that the funds are used for higher education. There are two popular types of 529 Plans – Prepaid Plans and Savings Plans. With a Prepaid Plan, you prepay or lock-in the price of future college costs. Plans are available to cover the costs of tuition and fees and dormitory housing. You can pay for your Plan in a one-time payment or on a monthly basis. With a Savings Plan, you save for a variety of future college costs. You decide when and how much you want to save in the Plan’s investment options. When it comes time for college, you use your savings to pay for actual college costs at that time.
- The best place to save for college is not under the mattress. Or in a simple savings account, for that matter. Such investments may feel secure, but they neither lock in future college costs at today’s contract prices (like a prepaid plan) nor accrue significant interest and tax-deferred growth (like a savings plan). Consider whether you can afford to leave those perks on the table.
The typical bachelor’s degree recipient can expect to earn about 66 percent more during a 40-year working life than the typical high school graduate earns over the same period. — The College Board
- Get your own finances in order. How aware are you of your own spending habits? Are you living on less than you make? Does your monthly spending truly line up with your priorities? You’ve heard it before, and it’s true: Living on a monthly budget will help you tell your dollars where to go instead of wondering where they went. In the process, you may pinpoint funds to save for higher education.
Bonus tip: Foster a love of learning with your child. If you want your child to succeed in college, they have to get there first! Cultivate curiosity in your little ones by having age-appropriate toys at the ready and reading to your child daily. For older children, know what’s happening in their school, and let them see how much you still love to learn new things yourself.
They’ll be off to college before you know it.