Sending your kids to college is the dream of every parent. But in the financial times that we find ourselves in, it is important to realize that savings is a crucial part of most college funding plans. Today parents need to plan on savings to help cover the cost of college tuition and expenses. The cost of a college education is projected to be covered on an average of two thirds by parent’s contributions. And for the parents, having a healthy saving plan to help fund a Childs college education is a big part of it.
Let time work for you. The way that compound interest works, the earlier that you start the more your dividends will pay off for you in the end. Your most valuable asset in savings for a college education is time; the earlier you start the more dividends and interest on your savings you will achieve. Even a little small investment each month can grow into a sizeable fund by the time your child’s college enrollment comes. If you saved fifty dollars a month for seventeen years, assuming around seven percent interest, you would have about $20,000 at the end of that time period.  Saving more, such as two hundred a month would end up with nearly $80,000 at the end of that time period.
It is always more financially sound to save for college than to borrow. You are setting a portion of your income aside for college education, and you earn interest on your money instead of paying interest out. When you save two hundred a month at seven percent interest, at end of ten years you would have almost thirty five thousand dollars. If you were to borrow the same amount with a term of ten years, at about the same interest your payments would be just over four hundred dollars a month.
When you get a later start, and college is just a year or two away, it is still not too late to plan and to save. There are tax advantages too. You can save into a section 529-college plan and gain tax advantage while saving at the same time. Opening a 529-college plan is one of the most advantageous for a late start as it allows savings without the tax penalty.
With the tightening of financial aid, savings is one concept that is more and more important in college planning. You should investigate all the options available, file for financial aid right after the first of the year, (the senior year of high school is fine, financial aid is partly awarded first come first serve) and look at all the resources you have.
