New Baby? How to Plan Today for College Expenses Tomorrow


Given the high cost of higher education, it’s important to start saving 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:

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 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 $313month. This is a little over $10/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. Earning 12%
instead of 8% will also make a big difference.

Putting Your Plan Into Action

Set up a 529 college savings account 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 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.


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