Given the high cost of higher education, it's important to start saving for your child's college tuition as soon as possible. If you've ever experienced debt, you may shudder at the thought of your children dealing with the burden of student loans. But how much do you really need to save each day to ensure your child can attend a good school? The answer will vary with the school and cost inflation.
Making a Plan
There are many ways to calculate a reasonable number. The most important estimations are the expected cost and the expected return you can earn on your money. With these two numbers, a simple spreadsheet or online financial savings calculator can do the rest.
Use this process:
Research
Do a little research concerning the expected educational costs 15-20 years from today. Costs have been skyrocketing the last decade. Even the experts are stumped by what the future may hold.
Keep tabs on these expected costs so you can change your plan as needed.
Configure amounts that will work for you
For example, perhaps you believe your child's educational costs will be $150,000.
Let's also assume that you believe you can earn 8% on the money you set aside for educational expenses.
Use one of the many financial calculators available online.
It's a simple game to find the monthly deposit that will equal $150,000. Assuming an initial amount of $0 and a period of 18 years, the required monthly deposit is approximately $313 per month. That is a little over $10 per day.
Play around with the calculator and try different numbers
You'll find that if you start with $10,000 the amount you have to save drops quite a bit.
Putting Your Plan Into Action
Set up a 529 college savings account or Educational IRA right away and begin contributing as soon as possible. The gains are tax-free if used for qualified expenses.
The key is to get started! Unfortunately, the number you need to save each month only gets bigger if you wait until later.
Once you make it a habit of saving, you can always change the amounts in your plan to fit current circumstances.
Now is the time to start planning for your child's educational expenses. You don't even have to wait until your child is born. If you plan on having children in the future, you can still get started today. Help make your child's future a bright one by planning ahead for their college.
