Forgot your password?

How To Save For Your Child's College Education

By Edited Jun 1, 2015 1 1

                One of the most daunting challenges for young parents is the prospect of funding Junior’s college education expenses.  Even at a public university or a junior college, the costs associated with tuition, fees, books and lodging can easily surpass $100,000 over the course of four years.  With that in mind, it’s more important than ever for parents to start saving for their child’s college education as soon as they can afford it.

                One of the most powerful forces that any saver or investor needs to understand is the strength of compound interest, particularly as it is applied to an investment over time.  If we can assume that an initial deposit will yield a reasonable interest rate for eighteen years until a child leaves for school, the initial savings will have appreciated considerably.  This “nest egg” will grow even faster if parents commit to making regular, predictable contributions to the savings account. 

                That simple concept, committing to a savings plan with regular additional deposits and adding in the compounded interest over time, is the basic principle behind the 529 series of College Savings Plans.  While the actual language used in sales brochures might seem intimidating at first, you’ll quickly catch on to the mechanics of the plan.  For nearly all parents, the single biggest factor in determining your savings success is how early you get started saving for your child’s college education.  When it comes to compound interest, starting sooner is definitely better, simply because a greater length of time will give accrued interest more time to compound.  In the end, this will mean more money in the savings account.

                Given the large number of students who seek out federal student aid, it’s pretty common for parents to wonder how their savings might affect their chances for receiving scholarships, grants, or federal student loans.  That’s a very valid concern, and my personal strategy is to eliminate the need for any financial assistance by saving enough money to pay for my kids’ college expenses in cash.  It’s a large goal, but a very worthwhile one.

                Whatever your personal college savings plan might entail, it’s important for you to get all the information you need in order to make a good decision.  Most 529 college savings plans come with a degree of risk involved, and nearly all providers charge administrative fees, so it’s a good idea to get all the facts in advance.  I based most of my own planning on the Financial Industry Regulatory Authority’s recommendations, which is available for the general public to download on Lulu.com.   

                Remember, all financial experts will agree that spending money on higher education is a form of investment.  So why should saving for higher education be any different?  Get the facts, make an informed decision, and give your children a head start on the road to success.  Good luck!



May 3, 2012 12:29pm
As a father who has had two daughters graduate from college, I know and understand the importance of putting the money away in advance. That is the only way that we were able, along with some student aid, we could afford to get it done. Very pertinent article.Henrygaines67.
Add a new comment - No HTML
You must be logged in and verified to post a comment. Please log in or sign up to comment.

Explore InfoBarrel

Auto Business & Money Entertainment Environment Health History Home & Garden InfoBarrel University Lifestyle Sports Technology Travel & Places
© Copyright 2008 - 2016 by Hinzie Media Inc. Terms of Service Privacy Policy XML Sitemap

Follow IB Business & Money