Saving for your child’s college education. That’s an elephant in the room for most families. You know you will need to do it, but for many of us, there are so many expenses right now that seem to take priority. How can you find the extra dollars to set aside to ensure your child is able to go to college when the time comes?
College tuition expenses are daunting. The College Board calculates the average annual cost of just tuition for a public university with in-state tuition to be $9,970 per year in 2017-18. That cost rises if you attend a public school out-of-state to $25,620 per year, and $34,740 for a year’s tuition at a private school. That doesn’t count room and board costs, which average another $10,000 to $12,000 per year.
The prospect of saving between $80,000 and $200,000 per child may have you despairing. There are some plans that can help you accomplish your goal, especially if your child will attend school in-state.
State College Savings Plans Are Designed to Help Families
September is officially College Savings Month in Minnesota and across the nation. That means that for 30 days, state college savings plans—like the Minnesota College Savings Plan, financial planners, colleges, universities and many others associated with higher education—work to inform families about the opportunities they have to plan for the future and to help focus attention on the need for saving for future higher education expenses.
College Expenses Continue To Rise
- In 2017, families spent an average of $23,757 on higher education expenses.
- Between 2011-12 and 2016-17, published tuition and fee prices rose by nine percent in the public four-year sector, by 11 percent at public two-year colleges, and by 13 percent at private nonprofit four-year institutions, after adjusting for inflation.
- The average cost of tuition and fees for the 2016–2017 school year was $33,480 at private colleges, $9,650 for state residents at public colleges, and $24,930 for out-of-state residents attending public universities. Additionally, room and board ranged from $10,440 at four-year public schools to $11,890 at private schools; and books and supplies averaged just over $1,200.
- These costs continue to rise every year.
Families Know They Should Save for College, But Few Do
There are countless examples of why saving for college is wise. However, results from the Sallie Mae and Ipsos study showed that while 86 percent of families always knew their child would go to college, only 39 percent of parents made a plan to pay for it.
Additionally, according to a 2017 TIAA study, nearly two-thirds (63 percent) think saving for college education should begin at birth, but only 26 percent of parents begin saving for education at their child’s birth; and 80 percent of respondents say saving should start before the age of six, but only 46 percent begin saving before their child turns six years old.
Even Small Amounts Add Up for College Savings
So how do we solve this problem? I want to encourage families to look at their saving options and begin saving TODAY. Studies show that simply having a college savings account makes your child three times more likely to attend college and four times more likely to graduate than if they did not have one.
Simply starting a College Savings Plan is a great first step. You’ll have a designated account to squirrel away savings, in a place that compounds interest and makes it difficult for you to withdraw from it without penalty. This account structure encourages you to keep the money in the account for its intended purpose and to incentivize you not to consider it money you can use for other things, like vacations, home repair, or medical expenses.
For families that already have a Minnesota College Savings Plan, consider annually increasing your college savings contributions and make sure you are on track to achieve your college savings goals by utilizing the Minnesota College Savings Plan calculator.
Strategies for Increasing Your College Savings
Once you have the account opened, begin with a reasonable amount you can put away each month per child. For as little as $25 a month, you can invest in your loved one’s future by saving in a Minnesota College Savings Plan, and this small investment can have a tremendous impact over time. Remember, every dollar saved is one less dollar you may need to borrow.
Here are some other strategies to help you find extra dollars to improve your child’s college savings:
- Deposit any gift money from relatives at birthdays and holidays into the College Savings Plan.
- Encourage grandparents and godparents to contribute to the account, either monthly or with an annual gift.
- If you receive a lump-sum payment, such as a tax refund, bonus, or inheritance, earmark a percentage of it for the College Savings Plan.
- Make an extra contribution to the Plan at significant milestones your child reaches, such as going to school, moving from elementary to middle school, or middle to high school.
Set a Reasonable Target
Minnesota College Savings Plans have options you can choose to help you set a reasonable goal. For example, you can choose to save for one, two, three, or four years of tuition at a four-year school. You can also do a combination, and save for two years at a community college and two years at a university, which is far more affordable. The sooner you get started saving, the more years you will have to capitalize on investments and interest for traditional College Savings Plans, and the lower your monthly payments on state tuition plans.
While it is often unreasonable to plan to save 100 percent of the college of college, a realistic goal for many families is to save 25 percent of projected college expenses. If this isn’t possible, save as much as you can.
The Minnesota Plan makes it easy for families to save for college. Accounts can be opened online at their website www.mnsaves.org. They also have a lot of information available right there on their site, including some valuable planning tools. Contributions can be flexible and made on your own schedule, but it is possible to have monthly contributions established so you don’t have to think about it. Also, each contribution can be as little as $25!
Again, the website is www.mnsaves.org and the toll free number is 1.877.338.4646. If you would like to make an appointment you can do that as well with their appointment scheduler.