A financial planner can help you understand how much to save, given your goals.
If Benjamin Franklin were alive today he might add two more certainties to his famous “death and taxes” quote: Raising children is expensive; so is college. The annual cost of raising a child is about $15,000, according to the U.S. Department of Agriculture’s Cost of Raising a Child Calculator.
You will spend $270,000 on housing, food, transportation, clothing, healthcare and childcare/education until your child turns 18, not including what to set aside for college. According to the College Board, the average annual cost for a four-year private college is $26,273, and $7,020 for public.
So it might come as no surprise that most financial planners say, “Save as much as early as you can.” You’ll need to decide between private and public school, and if you’ll pay college bills in full or in part. Some planners suggest that you pay for room and board, books, supplies and travel, and have your child pay for tuition and personal expenses. Grandparents may help as well.
A financial planner can help you understand how much to save, given your goals. There’s a big difference between saving to pay in full for a private four-year college and saving to pay in part for a public college.
“College savings should be part of an overall financial plan,” says FPA member Robert Schmansky, CFP®, of Northern Financial Advisors, Inc., adding that 529 plans and Coverdell Education Savings Accounts can be great college savings tools, but most savings can be accessed in some way for college. For example, the emergency savings and retirement plan contributions you make are strengthening your family’s finances.
Ways to pay for college include loans, work-study, grants and scholarships. Also, you may be on a career path that will enable you to pay some costs out of pocket, he says.
Be flexible. “We can’t know what changes will come to college financing when your newborn starts school,” Schmansky says. “Put together a plan, and revisit it as tax law and your financial picture change.”
For more information: www.fpaforfinancialplanning.org/LifeGoals/SavingforCollege; Planning for the Costs of Higher Education; www.collegeboard.com.
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