New Way to Save for College

One of the biggest challenges that parents, guardians, and aspiring students face is the thought of paying for college. While going to college is often considered a necessity for professional success, the costs of it have increased dramatically over the past few decades and the increase does not appear to the be slowing down. While saving for college is a long-term goal, a recent news article has proposed a savings plan that can make it seem a bit less daunting (https://www.nytimes.com/2017/04/26/business/calculating-college-savings-needs.html?_r=0).

 

The article believes that a good way to benchmark your savings is to have a goal of having $2,000 save for every age of your child. This assumes that you will send your child to public college. If you are considering sending a child to a private school, or a more expensive out of state college, then you should try to save $4,000 per year. This means that if you have a 10-year old, you should have $20,000 or $40,000 saved, depending on whether you want to send them to private or public college.

 

This assumption may seem very low compared to some other expert opinions. The main thought process behind this analysis is that you will only have half of the college costs saved by the time the child enters college. The balance of the education costs will come from your income, student loans, parent loans, scholarships, and any other sources of income that you may have. Setting this goal as a minimum could also help people to stay motivated to save.

 

May 25, 2017

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