Did you know September is national college savings month? College may seem far away when you have a newborn but as the saying goes, “time flies”. Those wonder years fly by fast and you wake up one day when Junior on the trike is already a Junior in high school. Here are 3 things to consider when thinking about college savings.
When to start,
How much to save, and
Where to look for tax deductible savings
When to start You are sure to roll your eyes when I say sooner the better – but go ahead roll those eyes, because the right answer is sooner the better. Benefits of starting earlier exceed far beyond waiting and making up the lost time by saving more. You get to take advantage of compounding and can afford to put aside less amount per month if you have 12-16 years to save for something. How much to save Here’s another eye roller because the answer is – it depends. If you start saving $236 a month for your 1-year-old child's college today in a 529 plan, you will have about $101,376 in savings by the time your child is ready for college. Saving the same amount in the average savings account will only grow to $52,777 which is $48,599 less than using a 529 plan. Drop your email address in the comments below or schedule a free 30 minute consult if you are curious about how the math works. Where to look for tax deductible savings www.collegesavings.org defines 529 plan as a tax-advantaged investment plan designed to help families to save for a beneficiary’s (typically one’s child or grandchild) future higher education expenses. All money grows tax free, federal, and state income tax. Some state plans may offer matching contributions. Use this nifty tool to compare and contrast different plans offered by your state. Find My State’s 529 Plan (collegesavings.org).