Last night I asked my tennis partner, whose daughter is a junior at a private college in the Northeast, how much he was spending on her education. He estimated around $60,000 per year. If that sounds like a shocking figure, just imagine what college will cost in 18 years, when your baby is ready to attend. It's enough to freeze many new parents into inaction. That's natural: If you can't envision saving enough to pay for college, why even try—especially when there are so many other, more-pressing expenses? Besides, you can always worry about college later.
Well, that thinking is wrong. College savings needs to be a priority as soon as your child is born. Socking away even $100 a month could add up to almost $50,000 (assuming a healthy 8 percent return) by the time your newborn is ready to leave the nest. Granted, that's still only a small chunk of the big bill, but it could make all the difference to your child when the time comes. Keep in mind that you don't have to fund college entirely on your own. Your could be eligible for financial aid and your child could earn scholarships and be eligible for student loans and work-study programs. So opening a college fund—early—is a vital first step.
That's the idea behind National 529 College Savings Day, which is set for May 30. It's designed to raise awareness about the importance of saving for higher education and the many advantages of 529 plans, which are the best way to save for college. This map shows what's happening in your state. One example: Virginia is offering a $50 match for new accounts as well as a drawing to win a $2,500 bonus for your child's future.
But I would like to offer these suggestions:
- Pick a plan with tax advantages. Granted, not every state offers a credit or a deduction. But if yours does, trust me, you'll be grateful come April 15.
- Set up an automatic deduction. You won't miss the money as much if it's being taken out of your paycheck and will be less likely to forestall a contribution from your checking account if you're forced to budget for it.
- Get Grandma and Grandpa to help. Your parents and in-laws want their grandkids to go to college. So don't be shy about asking them to contribute to your account or open their own in your child's name. And at birthdays and the holidays, suggest that they give a small present and write a check for his 529.
I'm lucky: My parents believe strongly in education and have been contributing to my kids' accounts since they came into the world. Even with their efforts, and ours, it's unlikely our 529s will cover more than half of their tuition. Still, that's a darn good start.
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Baby with mini laptop via Shutterstock