Saving for College
As a parent, you want the best for your child, including a college education. But college can be expensive, and saving for it can be a challenge. Here are some considerations to keep in mind when saving for college. First, keep in mind this post is written to inform, you should always work with a professional before making financial decisions. Our goal is to provide information, not direction with our blog posts.
The first step is to estimate the total cost of attending college. This includes not just tuition, but also room and board, textbooks, transportation, and other expenses. There are several online tools and calculators that can help you estimate the cost of attendance based on the college you are considering. Be sure to factor in inflation, as the cost of college tends to rise over time.
Once you have an idea of how much you need to save, the next step is to choose a savings vehicle. One option is a 529 plan, which is a tax-advantaged savings plan specifically designed for college expenses. These plans allow you to invest in a variety of mutual funds or exchange-traded funds (ETFs), and earnings grow tax-free as long as they are used for qualified education expenses.
When choosing a college, it's important to consider the potential return on investment (ROI) of the degree. This involves looking at the potential earning power of graduates in their chosen field, as well as the cost of attendance. While more expensive colleges may offer a better education, it's important to weigh the cost against the potential earnings of the degree. We can help model the cost savings, and help estimate ROI for the degree as part of your planning process. Just be aware the further in advance you work with our team, the better we may be able to help you in this area.
Another consideration is the availability of financial aid. Most colleges offer some form of financial aid, including scholarships, grants, and loans. Be sure to research the types of aid available at the colleges you are considering and the eligibility requirements. You may also want to consider filling out the Free Application for Federal Student Aid (FAFSA), which can help determine your eligibility for federal financial aid programs.
As you save for college, it's important to stay on track and adjust your savings strategy as needed. This may involve increasing your contributions or adjusting your investment strategy as your child gets closer to college age. Be sure to regularly review your savings plan and make any necessary adjustments. Clients of L2 Advisors benefit from regular meetings with their financial advisor to go over their financial plans and life plans. Often life throws us changes we didn’t expect; our plans prepare for unexpected life events but also focus on what we can control, as we work to help you pursue your financial goals.
Working with a financial advisor can be particularly beneficial when saving for college. A financial advisor can help you understand the various savings options available to you, develop a savings plan that meets your needs and goals, and help you stay on track over time. They can also help you navigate the complex world of financial aid and understand the impact of your college savings on your overall financial picture.
Before the bell rings and we have to go: saving for college is an important financial goal for many parents. By estimating the total cost of attendance, choosing a savings vehicle, and considering the ROI of the degree and availability of financial aid, you can develop a plan that aims to meet your needs and goals.
Working with a financial advisor can be particularly beneficial when saving for college, as they can provide guidance and support throughout the process. Remember to always consult with a financial professional before making any financial decisions. If you’re not currently a client you can Schedule a FIT Meeting with us at any time by clicking that link and booking directly with the advisor. If you are an existing client, or family of a client, and would like to discuss this topic further, reach out and we will be glad to talk.