College Savings Planning

College Savings Planning Can Be Stressful. We Can Help.

If you have young children, college savings planning is probably important to you. Equally important is saving money for other milestones in your life, ranging from buying your first home to retiring on your own terms. At Access Wealth, we help clients prioritize and manage these decisions in a way that promotes financial independence.

College Savings Planning is an Important Part of Financial Planning

Paying for college and other forms of private or higher education can severely strain family finances, so it’s essential to start saving as soon as possible. Having time on your side, especially if you’re focused on a college savings plan, allows you to take advantage of compounding returns and may provide some discipline as you make cash management decisions.

Because the goal of financial planning is to ensure you can pay for everything important to you while achieving financial independence, college savings planning is an integral part of the financial planning process.

Our Approach to Your College Savings Plan

We are laser focused on your goals. Here are a few things you can expect. We will:

  • Discuss if private grade school is being considered and how that will be funded
  • Develop a projection to determine how much money is needed to pay for college for four years (at a minimum)
  • Calculate how much you need to save each year to pay for your children’s college education, factoring in college inflation rates and the number of children you intend to send to college
  • Determine what you can afford to save by tying the college savings plan projections into a cash flow analysis
  • Analyze different college savings strategies to determine the most cost-effective and tax-efficient way for you to pay for your children’s college education and other education costs.
How Financial Planning Helps

It’s Important to Balance College Savings Planning with Your Other Priorities

How to save for college is probably only one of the things you care about. Most individuals also want to buy a family home, drive a nice car, take vacations, and send their kids to summer camp. Then there are milestones such as confirmation, bar/bat mitzvah, and weddings. And we can’t forget about one of the most significant milestones of them all – retirement.

Clients frequently ask our wealth advisors how they can save for all these different milestones simultaneously. This is another way that a financial plan can help you plan for your future. Developing different cash flow scenarios illustrates how you can balance college savings planning with retirement planning and gives you a sense of how much money you need to contribute to each savings goal.

How to Save for Retirement Signs Icon

A 529 Plan is One Way to Save for College

There are many ways to save and pay for your child’s education. One of the most popular ways to save for college and other education is a 529 Plan.

529 plans are qualified tuition plans that allow money to grow and be withdrawn tax-free when used for qualified education-related expenses. There are two types of 529 plans to consider:

· Prepaid tuition plans
· College savings plans

Almost every state has its own plan, some of which offer tax deductions. Each 529 Plan can also have its own set of rules, advantages, and disadvantages. In addition, the SECURE Act expanded the reach of 529 plans so that 529 plan distributions can now be used toward tuition for private Kindergarten through Grade 12 (up to $10,000 per year).

A financial planner can help you explore the various options and develop a strategy that fits your family’s needs.

What to Include When Saving for Your Child’s College Education

When developing your child’s college savings plan, you need to consider four categories of expenses.

Tuition

Public and private school costs vary widely. Financial aid typically only helps with this category.

Room and Board

Housing and meal program costs vary.

Books and Supplies

Costs vary by school and academic focus.

Miscellaneous Expenses

Transportation, housing supplies, renters’ insurance (if off-campus), entertainment and more.

Financial Strategies to Help You Pay for College

According to the College Board’s 2020 report, Trends in College Pricing and Student Aid, a moderate college budget for an in-state student attending a four-year public college average $26,820 per year. Out-of-state students at public colleges can expect to pay $43,280 per year, and students attending private colleges can expect an average budget of $54,880.

These numbers are daunting for most families. Even if you start contributing to a college savings plan on the day your child is born, you may question if it’s even possible to save enough money for college while trying to fund other important goals and lifestyle choices.

So how do you pay for college if you haven’t saved enough money?

Setting expectations well in advance of when your child will apply for college can be helpful in determining how to pay for college.

  1. Determine how much you can afford to spend and then apply to schools that fit that budget.
  2. Apply for every available grant and scholarship you can find.
  3. After grants and scholarships have been exhausted, look into government student loans. To receive a federal loan, such as a Stafford Loan or PLUS Loan (Parent Loan for Undergraduate Students), complete the Free Application for Federal Student Aid (FAFSA).
  4. If you have good credit, consider obtaining a bank or credit union loan.Often, when there is a financial shortfall to pay for college, people consider borrowing money from their 401(k) plans. However, this strategy can have a downside since it can impact your ability to retire when you want to. Speak with your financial planner before using your retirement savings to pay for college and other education costs.

An investment in knowledge pays the best interest.”

- Benjamin Franklin

Start Planning for College Now

Given the rising costs of higher education, it’s essential to identify the best college savings strategies early to minimize the amount of money you need to borrow. College savings planning is an important piece of your comprehensive financial plan. Having a plan in place will help ensure you can achieve financial independence and live the life you dream about. Contact an Access Wealth advisor today to learn how to get started.