Funding Your Children’s College – It does not have to break you.

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Start early. Start small.

The common element here is just be sure you Start.  It is all too easy to put off starting a college fund for our children.  We all want to provide our children with a college education.  The intention is usually to start a college fund “when we can afford to”.  After all, when your child is born, there is plenty of time.  But all too often, clients find themselves a couple years away from sending their child to college with little or no funds set aside.

Time passes without you noticing it.  It is true that your children will grow up in the blink of an eye.  I speak from experience because it happened to me.  When it comes to savings and the time value of money (compounding), I think it is easy to realize that the sooner we start, the better off we will be when it is time for college.

So basically, the “plenty of time” excuse is really used to mask the fact that we do not feel we can afford to carve out money from our current daily life for college.  With the monumental nature of the cost of college, you will likely never feel you can afford to start a college fund that will be of any significant value.  Or will you?

Let’s break it down.

Can you set aside $10 a week?  It is not much.  You would most likely not even notice it missing after 6 to 8 weeks have passed.  But that really won’t help with college will it?

Actually, if you start a college fund the month your child is born, and put as little as $10 per week into the fund, assuming an annual interest rate earned of 2%, you would have in excess of $11,000 available for that first freshman semester.  Even at today’s cost of a college education, that should be enough for the tuition portion of the first full year at most State colleges.

Now consider how you could get that fund to the level needed for a full four year college program.  If you managed to set aside the $10 above for the past year, then couldn’t you afford to do the same thing again?  Set aside $10 from your weekly budget?  On your child’s first birthday, make the commitment to again pull out $10 from your weekly budget for that little college fund you have.  Now you will be putting in $20 per week.  If you never increase it again, and based on the 2% rate of return above, you should have nearly $21,800 available when your child turns 18 and heads off to college.

Still not enough for four years of college?

Keep making the same $10 annual increase and the fund will exceed $100,000 by the time your child reaches age 18.

There are other aspects, tips and methods to plan for your children’s college years.  Be careful.  Not everyone is an expert.  You should seek assistance from a qualified financial advisor or CPA to be sure you are provided all the options and any related perks or pitfalls that may be involved.

Learn how we can help you plan for your financial future by contacting us today.

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