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Ask Yourself These Questions When Building a Plan to Save for College

February 11, 2021

With inflation rates for college costs estimated at 3%-10% per year—tuition and fees, along with room and board, could skyrocket by the time your child is a freshman. This leaves parents wondering how to help them pay for it all. Like any savings goal, putting away the money for college starts with a plan. So here are some questions to consider in determining what you will need to achieve.

Will I contribute to my child’s college education?
The first decision to make is whether you will pay for all or part of your child’s college education. This is as much about what you can afford as it is about what you want your child to take on as a responsibility. Talk to them about what kind of college experience they would like to have and whether some sort of job that pays will fit into that vision.

READ MORE:  Share the Financial Responsibility of College with Your Child

Will my child attend a public or private school?
Next to consider is what type of education your child desires? There is a big difference between paying for a private university or a public college. Several online sources provide predictions for the rising tuition rates in the coming years if you do some quick searches.

If you plan to contribute, how much should you prepare to save?
What will it take to help reach your savings goal? Our financial calculator enables you to find out. Enter in your savings plan and view your financial results. Click the report button to get more information about your plan and what you can do to stay on track.

What is the best savings method to protect my money?
A 529 education savings plan is the popular choice because it offers a tax-advantaged account to put away money for future educational expenses. However, the IRS strictly requires 529 funds be used only for qualified education expenses (tuition, books, fees, room, and board) to avoid taxes and other penalties. Other options include UTMA accounts, Coverdell Education Accounts (which have the same use stipulations as 529 accounts), and Taxable Investment Accounts. Some families choose to secure their money in different ways, like pairing a 529 with a Taxable Investment Account to diversify college savings.

How do I balance college with other saving goals?
While it is important to develop a college savings plan, you can’t forget that saving for retirement is essential too.  Arguably, you might consider saving for retirement more important as there is no financial aid or loans for retiring. Doing some homework to prioritize your goals will make it much easier to determine where to place saving for college on the list. For best results, work with a financial planner to help you develop a plan.

Contact our Financial Services Department
at 800-467-7216 for further assistance

*Consult your tax advisor about any specific tax implications and requirements, including differences in IRS rules for the various education plans/accounts.