Saving Early for
a College Education
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.
But, 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 $19,000 at public
universities for in-state students, and over $39,000 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. And remember, increasing numbers of students are spending more
than four years in college.
One of the keys to
accumulating the money needed to send your child to college is to 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
$20,000. Assuming that costs increase 6% annually, her first year will
cost over $38,000. If her parents want to have saved all of her college
costs by the time she begins, they need to have accumulated over $166,000
Let us assume her
funds earn 5%. If her parents had started at age four, they would have
needed to save about $1,136 per month. If they start now when their daughter
is seven years old, their monthly savings need to be $1,222. If they wait
until she is 10, they will need to save $1,419 per month. If they wait
until she is 13, they will need to save over $1,919 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.
Starting to save for
that college education as early as possible makes a big difference. And
the decision of when to start is up to you.