Is College in Your Child’s Future?
Its no secret that the cost of sending just one child to college for four years can be staggering tuition and fee hikes regularly outpace…
Its no secret that the cost of sending just one child to college for four years can be staggering tuition and fee hikes regularly outpace inflation. The following chart shows how average college costs would continue to increase at a 5.2 percent annual inflation rate.
Rather than sending your student into the world with a burden of student-loan or private debt, consider saving options to help cover at least a portion, if not all, of higher-education expenses.
Start saving early. Its common to assume that saving will be easier in the future when youre earning more, but as your family and income grow, so do your expenses associated with your standard of living. If you wait until your student is closer to college age, you may find youve waited too long and may face the prospect of scaling back the familys finances in other ways to save for hefty tuitions, fees and living expenses.
Put time on your side. When you start saving early, college savings can earn substantially more over time through the power of compounded growth. For example, suppose you start putting aside $100 every month for an 8-year-old child. Assuming a 5 percent annual growth rate, youll save $15,592 by the time your child is ready for college but will have invested only $12,000 out-of-pocket.
If you wait until your child is 15 years old to start saving, youll have to put more money aside each month to save the same amount, and your out-of-pocket investment will be much greater. For example, at the same 5 percent annual growth rate, it would take $400 per month to save $15,556 in time for college, and youd have invested $14,400 out-of-pocket.*
Know your options. Fortunately, parents and grandparents who intend to cover or contribute to a childs education costs have more choices today than theyve ever had. If youve not yet looked into an education savings plan, Wells Fargo Advisors can help you choose among a variety of savings vehicles, including 529 plans, Education Savings Accounts (ESAs) and custodial accounts.
Visit wellsfargoadvisors.com/school for more information.
* This information is hypothetical and is provided for informational purposes only. It is not intended to represent any specific return, yield or investment, nor is it indicative of future results.
This article was written by Wells Fargo Advisors and provided courtesy of Terry R. Campbell and Susan Paolo, Financial Advisors in Chardon at 440-286-2553.
Investments in securities and insurance products are: NOT FDIC-INSURED / NOT BANK-GUARANTEED / MAY LOSE VALUE
Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.
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