Save for College or Trade School
Goal: Save for your child’s College or Trade School
Step 5: Start saving for your child’s College or Trade School.
(If you do not have children, you can skip to Step 6)
According to US News, the average cost for In State tuition to a public university is $10,662 for the 2023-2024 school year. That’s $40,000+ over 4 years!
Imagine this. Your child(ren) graduates college or trade school debt free. They go out into the world without student loan debt. They can start investing to build wealth, giving them plenty of time to let their money grow.
Uncommon these days? Definitely.
Will they be thankful? Hopefully.
Once you pay off all of your debt (except the house) and fully fund your 3 to 6 month Emergency Fund, you can start saving for your child’s college or trade school.
If you are still in Steps 1 thru 3, focus on getting out of debt and building your fully funded Emergency Fund before contributing to any College/Trade School savings.
Have you ever flown on an airplane? The flight attendant gives safety instructions over the intercom. They explain that in case of an emergency, oxygen masks will drop from the ceiling, BUT… they tell you to put YOUR mask on before helping others. You will not be of any use to others if you do not put your mask on first.
This is much like personal finance. As much as you want to help, sometimes you have to help yourself first.
Once you are out of debt and have a fully funded 3 to 6 month Emergency Fund, you can start saving for College and Trade School if you choose.
The most common way to save for College is via a 529 Plan. 529 Plans are tax advantaged accounts that are designed for education savings. Benefits of these plans include; earnings can grow tax free, tax free withdrawals for qualified education expenses, and beneficiaries can be changed within the same family.
The earlier you are able to start funding the 529, the longer the it has times to grow.
Maybe you are late to this step. Maybe you didn’t have the runway to save for your child’s college. It’s ok, there are a couple of things you can do to help.
Educate your child(ren) about the dangers of student loan debt.
Encourage your child(ren) to apply for scholarships.
Encourage your child(ren) to work while they are in school, to pay for their tuition.
Assist in cash flowing college if you are able.
*** Consult an Investment Professional before opening a 529 Plan. This page is for informational purposes only.***
FAQs
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No.
There is no rule that you must help your child pay for College or Trade School.
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The earlier the better.
You can open a 529 account once your child is born.
There is no harm in starting later, your money just won’t have as much time to grow.
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You can open a 529 Account at brokerages such as Charles Schwab, Vanguard, and Fidelity.
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Reach out to a qualified investment advisor who can help guide you through various plans and options.