Reminders and lessons learned during National College Savings MonthSubmitted by KWB Wealth Managers on October 23rd, 2019
As I sent my eldest child, Bella, to 2nd grade a couple of weeks ago, I began thinking of how fast life has gone by. It feels like she was just an infant last week. I’m enjoying every minute of it, as so many have advised me, but as a planner, I can’t help but look forward and wonder if my husband and I will be totally prepared to send her off to college some ten years from now.
According to Sallie Mae, 9 out of 10 parents believe their child will go on to receive higher education but only 4 out of 10 are actually saving. I am definitely part of the first statistic and luckily not part of the later. I began saving for my daughter and my 4-year-old son soon after they were born. I mean after all, I am a financial advisor, so I must practice what I preach.
Unless you’ve been living under a rock for several years, you’ve probably heard about the mounting concern over increasing student loan debt. I see articles constantly about the topic and decided to login to my 529 plan accounts to check my saving progress. For those of you who haven’t started saving, I want to point out that there are several vehicles in which to save for college. I chose a 529 plan because all earnings are tax-free as long as the funds are utilized for higher education.
After logging in to check my balances, I then went to my favorite website Savingforcollege.com. Anything you want to know or don’t want to know can be found on this site. From basic information to calculators to resources, whatever I’ve needed to find, it’s on there. I decided this time to use the calculator to see how I’m doing.
Assuming Bella goes to an in-state public college for four years in the year 2030, the total cost will be $136,756 (considering tuition inflation). One good thing I learned from this is now I have a goal. The bad thing is that even if I quadrupled my current monthly contribution, I’ll still have a shortfall of $68,000. After learning this, I dusted my knees off and submitted an alternative calculation. What if Bella goes to a community college for her generals, like her mom, and then heads off to a University to finish her degree? According to the calculator, I’ll only have a shortfall of $55,000. This is assuming Bella does not receive any scholarships or grants.
Now I know this might seem a little depressing but I’m a glass half full kind of woman. As a planner, I know the importance of saving and saving early. Compound interest is powerful and I intend to use it to my advantage. I view my little exercise as a lesson. I need to increase my contributions, monitor each year, and hope the stock market is kind over the next 10 to 14 years. I encourage all of you to complete this same exercise. If you haven’t started to save, do it NOW. If you hurry, there are some plans that offer incentives this month for establishing a new account. I recommend visiting Savingforcollege.com, so you can educate yourselves and create an action plan. You’ve got this!