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Can a family save enough to send their kids to college?

September 12, 2012

One of the biggest questions I get from parents today is “Is it even possible to save enough to send my kids to college?” When both my girls (Chelsey & Lace) were looking at colleges to go to I thought the same thing, even being the financial guy that I am, I certainly had concerns. Given that our kids will be competing for jobs with others around the world, the importance of higher education has never been greater. With college costs skyrocketing  it’s critical for parents to start thinking as soon as possible about how they’re going to pay for higher education. Starting early will be the best way for parents of average or modest means to foot the college bill and prevent their kids from drowning in debt after getting their college degrees. A solid investment plan is the only way to keep up with soaring college costs.

Here are some staggering numbers to put all this into perspective. If you think you can wait and do nothing, and just pay for college out of your paycheck when the time comes, you might want to start asking for a raise now.

  • Today, the cost of a four-year degree as an in-state resident at a public university s $33,300, says Savingforcollege.com. In 18 years, that cost will soar to $95,000 based on 6% annual inflation.
  • To save for this investment you’re going to need to put an investment plan in place as soon as possible. Let’s say you start the moment your child is born, expecting for four-year enrollment in 18 years and a cost of $10,000 a year. You’ll need to save $241 a month to have enough put away, assuming college costs rise by 6% a year and your investments return 7% a year.
  • However, if you wait just seven years to start saving, the plan gets tougher, and you’ll need to save $322 a month to make it, or 33% more.
  • And if you wait until your child starts high school, as many parents do, you’ll need to save $563 a month. Again, all these numbers are based on the assumption you’ll get a 7% annual average return.

Your best bet is setting up a 529 college savings account as soon as possible. You can sock away money and take the contributions and gains out, tax-free, if you are using the money for qualified college costs. It’s about the closest thing you’re going to get in the form of help in saving for this massive obligation. Most 529 plans have decent choices of low-cost mutual funds that spread your money in stocks and bonds.

You can save for this goal. Just get started right now and create an investment plan that will get you there. Let Gunwel Associates help you find a solution to sending your kids to college and any other financial solution you may be in need of as we are here to help. You work hard for you money, let us work smart to help you keep it! Give us a call today at 615-730-9444 or visit our website at www.gunwel.com See you soon!

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