With the cost of college increasing almost exponentially lately, Iâ€™ve had several requests for information on college planning, so I thought Iâ€™d put together some tips.
1. Start Early â€“ Obviously the sooner you can start saving for college, the better.
2. Know How Much You Want To Pay â€“ First decide if you are paying 100%, or less. I read a neat article on this decision that broke down college savings into 3rds. The parents pay a third. The children pay a third. A third is funded from grants, scholarships, loans, etc.
3. Estimate How Much You Are Expected To Pay – By answering some questions about your finances, you can get an idea of what you may be expected to pay. Revisit this calculation and make adjustments as your situation changes. You can find two EFC calculators at: http://www.finaid.org/calculators/finaidestimate.phtml
4. Choose Where to Save â€“ Do you want to save in traditional college funding accounts like 529 plans, Coverdell Education Savings Accounts, UGMA (Uniform Gift To Minor) accounts, or Series I and EE Savings Bonds? Or would you prefer to save in non-traditional college savings accounts like taxable brokerage accounts, Roth IRAs, or others?
5. Calculate Your Monthly Saving Need – There are several online calculators that you can use to determine how much you need to save monthly in order to fund your child’s education.
The next article will discuss college planning for teenage children.