By Matt Gallagher
The average earnings of college graduates exceed earnings of those who did not go to college in every US state. But higher education represents something much greater to many families – a future of unlimited potential.
If you have children, grandchildren, nieces or nephews, you’ve likely spent time imagining their future. Though a solid education may put them on a path toward their dreams, it can also leave them in debt. Luckily, families that create a funding plan will be better prepared. The most effective education funding plan is one that begins early by funding a 529 college savings plan.
An education plan is a roadmap that will guide how you fund future education expenses. It outlines your future goals, current and projected financial needs, and a range of savings and investment strategies to help you make consistent progress along the way.
Although every household’s financial situation is different, there are some actions that everyone should take. As with any large financial decision, understanding your budget and how much you can save toward education needs to be addressed first. You likely have other investments, like a retirement plan through your employer, and funding future education may require additional savings beyond the amount you’ve already set aside.
Flexibility will be necessary. The future is unknown, and the best plans are those that can adapt when put to the test. Your child’s dream school may change, or you may need to reprioritize spending and saving for a time. Make room in your roadmap for the unexpected so you can continue to invest in an education plan if your circumstances change.
Creating an education funding plan that works for your family requires time and commitment. One of the best ways to make that commitment is to write down your funding goals and needs, which helps you track your progress and remain accountable.
Documenting your plan also helps to account for less obvious costs that still need to be taken into consideration. Will your child live on campus? Do they need transportation or a budget for meals? What about insurance coverage? And don’t forget about books. These expenses can add up quickly, so it’s important to project what they may be in order to properly fund them.
- Understand your household budget and how much you can afford to save, compared to the tuition of your preferred university.
- Take simple actions first. Pay off debt to free up more in savings or look for areas where you can cut back on spending.
- Encourage your next generation to get involved by looking for scholarships when the time comes to apply to their dream school.
Self-funding your next generation’s postsecondary education is a good goal, but it’s not your only option . Even if you started saving in an account when your child or grandchild was first born, inflation may mean that you won’t have all the funding required once it’s time for them to attend college.
For most families, paying for college requires a selection of strategies, like combining your savings earmarked for education with applicable scholarships. Many loans are awarded independently of financial need; the average undergraduate student in 2019-2020 received $7,980 in scholarships or grant aid.
If you’ve been saving for college expenses but don’t have confidence that you’re going to reach the amount you want for your next generation, it may be time to talk to a professional who can help you prioritize your savings to ensure you get as close to your ideal number as possible.
Matt Gallagher is a partner and head of business development at TrinityPoint Wealth. He can be reached at 203-693-8519 or by email at [email protected]
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