Today we asked Mark Saunders, SVP Financial Advisor with Progress Financial Services, to address reader questions about how parents can save up for their child’s college costs.
What Parents Need to Know about College Savings
Q.) What type of accounts are best to start saving for my child’s college? What’s the differences between them?
If the funds are used solely for education, the 529 Plan that is offered by the state where you reside is usually best. The plan that is offered by your state can provide both federal and state tax benefits that may not be available together with a plan offered from another state (consult your tax advisor for tax advice).
Q.) If we’re getting a late start, should we worry about saving for all of college? What’s the best path from here?
Even with a late start, the tax benefits that are available within a 529 Plan can be beneficial. Also remind grandparents of any account that you establish for future education costs – they may be in a position to help boost the account.
Q.) Are fees important? Should I worry about the fees I pay on investments for college?
Fees are always important to consider when investing your money. It makes sense to evaluate all the benefits, performance, services, etc. you will receive when deciding on an investment and the cost of that investment.
Q.) What do financial experts predict the cost of college tuition will be in the next 10-20 years?
College costs vary based on a number of factors – community college vs four-year school, in-state vs out-of-state, public vs private, living on-campus vs off-campus, etc. There are a number of online resources available to determine the current cost of college and the estimated future cost of college. One example is www.BigFuture.CollegeBoard.org. This site has a number of resources available for college. To provide an example: The University of Alabama starting in 10 years and taking 4 years to complete a degree would cost approximately $189,500.
Q.) My partner and I haven’t really saved much for retirement or college. What should we focus on?
For retirement, if your employer has a 401K or other retirement plan in place, this can be a good start and they may even match contributions that you make up to a certain percent. If there is not a plan in place or you are self-employed, then starting a Traditional IRA or Roth IRA can make sense.
For college, whether you use a tax-advantaged plan like a 529 Plan or not, any amount that you set aside today will help with those future expenses later. Let time be your friend.
ABOUT THE EXPERT: Mark Saunders is the SVP Financial Advisor with Progress Financial Services. With more than 25 years of experience in investments and insurance, Mark is licensed in multiple states throughout the southeast. He is a graduate of Leadership Huntsville Management Academy Class 7 and has co-chaired the program’s Finance and Operations Day for two years. Born and raised in Huntsville, he graduated from Grissom High School and the University of Alabama. He is happily married with two daughters who have graduated college and one in 11th grade. He enjoys playing tennis and golf, cheers for Alabama football and is an active member and Board Member of Cove United Methodist Church. Drawing from his years of experience, he can provide professional guidance for your families’ investment needs for education, retirement and more.
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Rocket City Mom is a website about raising children in and around Huntsville, Alabama. Started in late 2010 by a local mom and newcomer to Huntsville, Rocket City Mom has grown into a thriving community of local parents and now boasts a staff of four, thirteen regular contributors, and tens of thousands of Tennessee Valley readers making it the #1 Parenting Resource in North Alabama.