Deborah Fowles at The Balance writes, “If you’re the parent of a newborn or young child, you’ve probably heard the depressing estimates of the cost of a college education when your child is ready to enter college about 18 years from now.” The cost of four years of a public college is expected to cost in excess of $100,000 and for a private school over $200,000. So, how to fund your kids’ education is a big question on parents’ minds.
How to Fund Your Kids Education
- Start Early. The sooner you start investing for your child’s education, the better. As with any other investment goal, time and compounding interests are your best friends and most valuable asset. RapidTables has a calculator online that you are free to use. Use it to figure out how a disciplined savings plan can get you to the $100,000 you will need.
- Start a Plan. The first step in making a college savings plan is to estimate what the total cost of your child’s education is likely to be. The average in-state tuition and fee total for a four-year public school came to just under $10,000 for the 2017-18 academic year. At five percent inflation per year, the estimated cost per year 18 years from now would be around $24,000.
- Save Often and Regularly. In order to amass enough money to finance four years of college, you not only need to start saving early but also invest aggressively and regularly. Rather than investing a certain lump sum every year, consider contributing a small amount every month to take advantage of dollar-cost averaging strategy and compound interest, as every month counts.
- Invest Wisely. The only thing worse than not saving at all is putting your money in a passbook savings or money market account. Stock funds historically have almost always exceeded other investments over periods of ten years or more. Look for no-load (no fee to purchase or sell) mutual funds or exchange-traded funds for diversification with fewer costs. But certain types of real estate can yield 10% to 12%. That’s something Paige Panzarello of Coal to Cash Homebuyers, Inc.. is an expert at teaching and investing.
- Know Your Investment Options. Be sure to take advantage of any tax-deductible or tax-deferred methods that you’re eligible for. Some of the best investment options for college savings include:
Coverdell Education Savings Account (formerly known as an Education IRA)
State College Savings Plans (529 Plans)
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