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Mistakes to Avoid: Delaying Saving for a College Education

Paving the Way
Before you became a parent, you were probably already imagining all the things your child could grow up to be. Maybe a doctor, teacher or professional athlete. Someone who might change the world. Before that can happen, it’s important that you plan ahead and save for your child’s college education as early as possible. Being able to afford to send your children to the colleges of their choice, without being limited by cost, can be one of the great joys of being a parent.

Preparing for the Future
Attending college is expensive. According to a study from the College Board (Trends in College Pricing 2006), the average total cost for a year (tuition, books, fees, room, board, transportation, and other expenses) was over $16,000 at public universities for in-state students, and over $33,000 at private colleges. And costs continue to rise.

Over the past decade, the costs of getting a college degree have gone up about 6% per year on average. If this trend continues – and all indications are that it will – the cost for a year of college will double in 12 years and triple in 19 years. Plus, the number of students spending more than for years in college are increasing. Preparing to save as early as possible can help ease the stress of college expenses.

The Key to Providing a Solid Education
Start saving early. Let us use an example of a seven year old (11 years until college) that will attend a state university as an in-state student. The estimated total current cost of a year at that university today is about $16,000. Assuming that costs increase 6% annually, her first year will cost over $30,000. If her parents want to have saved all of her college costs by the time she begins, they need to have accumulated over $132,000 by then.

Let us assume her funds earn 5%. If her parents had started at age four, they would have needed to save about $897 per month. If they start now when their daughter is seven years old, their monthly savings need to be $977. If they wait until she is 10, they will need to save $1,136 per month. If they wait until she is 13, they will need to save over $1,535 per month. Starting to save early not only enables you to spread your saving over a longer period, but you also get he benefit of the earnings on the funds for a longer period of time.

Saving for that college education as early as possible makes a big difference. Time goes by quickly and before you know it, your child will be a teenager ready to start college. The more you save now, the less you’ll need worry about additional college expenses in the future.