September marks College Savings Month and while many of you may think that the beginning of a school year is an odd time for thinking about college savings, this is when more than 90% of parents to high schoolers report that they start to think about affording higher education. Given data that indicates the average student loan debt for college graduates is over $35,000, starting a college fund early can help keep debt manageable upon graduation.
Focused on helping their members build better lives through long-term financial fitness, Financial Partners Credit Union – a California-based credit union with over 84,000 members – is sharing important tips to help parents and students plan for college.
“With priorities like mortgages and saving for retirement, planning for college savings can seem daunting,” says Mario Osorio, Vice President of Wealth Management at Financial Partners. “While scholarships and grants are options to help afford college, the application process happens closer to college-age, so they aren’t always a reliable plan. Starting early and saving a small amount each year in a college savings account can make a huge difference in the long run – studies show that families with a college savings plan end up with 30% less student loan debt than those who didn’t plan in advance.”
Here are some basics to keep in mind when planning for college:
Set A Goal
The average tuition for private colleges is about $40,000 per year and $11,000 for state residents at public colleges. Use these figures as a baseline for a savings goal and also plan for scholarships and grants for which your children may qualify.
Take Advantage of Tax-Free College Savings Accounts
529 Plans and Coverdell Education Savings accounts offer tax credits or are free from income taxes. Saving just $50 a month in an account that earns on the low end of 2% adds up to more than $15,000 over 18 years. Set an amount you can afford comfortably and have the money automatically transferred into the college savings account each month.
Invite others to Contribute
Anyone can contribute to 529 Plans – so letting family members like grandparents know about accounts can also help grow contributions. If these relatives routinely give cash gifts to the kids for holidays and birthdays, ask them to send the money to the college fund instead. This alone can add tens of thousands of dollars to savings over the years!
“One of the many benefits of a credit union over other financial institutions is that we are member-owned and invested in the financial success of our members and their families,” says Osorio. “We work one-on-one with our members to create plans that account for all of their financial needs.”