(August 31, 2022) - It’s September, which is National College Savings Month! This is the month when we officially recognize the importance of saving for post-high school education and training. Let’s face it, college is expensive, and getting more so with every passing year. College Savings Month is a great reminder for families to put money away for their student’s future education expenses. Starting early and forming regular savings habits – twelve months a year – is truly the key to reducing the inevitable college sticker shock.
One of the best tools available for saving for future education expenses is one we talk about a lot at WA529 – the 529 plan. Most 529 plans are state-administered, and come in two flavors: prepaid tuition plans, which allow you to essentially pay for tomorrow’s tuition at today’s price, and college investment plans, which work much like a Roth IRA. You contribute after-tax dollars, which are invested per your direction. Any gains realized are tax-free at withdrawal, as long as they are used for Qualified Higher Education Expenses (QHEE). Almost every state in the U.S. offers some form of 529 plan, and many offer more than one.
Once you’ve researched which plan is best for you, you may be asking yourself when the best time is to get started. The answer: yesterday. The second-best time? Today. Start as early as you can and save what you can, when you can. If you’re not sure how much your student will need, using a tool like this college savings calculator can help give you a ballpark estimate.
When you first see the total estimated cost of college in the future, you might feel the cold icy clutch of panic setting in. Resist. Remember, if you’re starting early, you have time. You’re not required to save all the money at once. For that matter, you’re not required to save all of it, period. Most families access a combination of financing options for their student’s education; savings, scholarships and loans all play a part. Remember two things: one, a dollar saved now is a dollar you or your student won’t have to borrow (with interest) later. And two, it takes a village. Get grandparents, aunts, uncles, other family, and friends involved. At gift-giving time, a contribution to the student’s education savings is truly a gift that keeps on giving.
Finally, look into rewards tools such as Upromise, where you get cash back for buying everyday items and have the rewards deposited directly into your 529 account. Some credit cards allow you to do the same.
College Savings Month is clearly a great time to get started toward achieving your student’s future education goals. But getting started is only half the battle. It’s equally important to keep going.