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How Starting 5 Years Early Can Double Your College Savings!

Welcome, parents, to an exciting journey that involves securing your child's future through smart financial planning - yes, we're talking about saving for college! In today's fast-paced world, providing a quality education is one of the best gifts you can give your child. But don't worry, you can set your kids up for college while still teaching them plenty of financial lessons along the way!


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The Benefits of Starting Early


Let’s dive right into the heart of the matter: starting early. Now I know that you understand what compound interest is, but sometimes it’s easiest to see how it happens in action.

For this example, let’s assume that your saving in a 529 plan that’s invested in S&P 500. This has a historical return of a little over 11%, so we’ll use that as our baseline. Now let’s look at a couple different examples of when you start saving and see how much you have set aside for your child to go to college! And remember, the AVERAGE college tuition in 2023 is $104k for a 4 year degree.

  • Begin at Birth, $150 a month. By the time they go to college you’ll have ~$91k invested!

  • Begin at 5 years old, $150 a month: By the time they go to college you’ll only have $47k invested! To get to $91k, you’ll need to invest $290 a month, almost double just for starting 5 years later!

You can see how the amount you need to invest to even get close to a college tuition exponentially increases the later you start!




Practical Strategies for Saving for College


Explore Educational Investment Accounts (529 Plans)

One of the best ways to save for your child's education is through 529 plans. These accounts offer tax advantages and are specifically designed to help you save for educational expenses. They’re like little treasure chests, waiting to fund your child’s dreams!


Pros and Cons of Saving vs. Investing Methods

Consider when you are starting to save for your child’s college. If you’re within 5 years of them starting, it might be safest to put the money into a High Yield Savings Account so you’re not affected by market fluctuations. But if you’re any farther away than that, it’s historically certain that you’ll make much more money by investing the funds into S&P 500 or another index. Remember, the historical return for the S&P 500 is 11%!




Involving Kids in the Saving Process


Kids and Their Allowances

Empower your kids by involving them in the saving process. Encourage them to contribute a portion of their allowances or earnings to their college fund. This not only teaches them financial responsibility but also instills a sense of ownership regarding their education.


Setting Goals and Tracking Progress

Goal-setting is crucial. Help your child set realistic financial goals for their education. Make a visual chart that tracks their progress - it could be as simple as coloring in a portion of the chart for every milestone achieved. Celebrate these achievements together; it creates a positive association with saving.


Inspiring Success Stories

Hearing about other families’ success stories can be incredibly motivating. Read about families who actively involved their kids in saving for college. Their experiences might offer valuable insights and inspire you with creative saving strategies.




Addressing Common Challenges


Facing Financial Hurdles

We understand that financial challenges are real. Many parents worry about making ends meet while saving for their child's education. If you find yourself in this boat, please reach out. We can, and will, put you in touch with financial advisors who specifically work with families saving for college.


Overcoming Budgeting Challenges

Budgeting can be tough, especially with a family to support. However, with careful planning and discipline, even tight budgets can accommodate a college savings plan. Look into budgeting apps that can help you track your expenses and find areas where you can save more effectively.




Conclusion


In conclusion, the journey of saving for college is not just about money; it's about instilling lifelong values in your children. By teaching them the importance of financial responsibility and involving them in the saving process, you are giving them a gift that will last a lifetime.

As you embark on this adventure, remember that every small effort counts. Start early, explore different saving methods, involve your kids, and don’t be afraid to seek help when needed. Saving for college is not just a financial decision; it's an investment in your child’s future, and the knowledge you impart along the way will empower them for years to come.

So, parents, gear up, plan smart, and watch your child's dreams take flight, one saved dollar at a time. Here's to a brighter, financially empowered future for your family!


 

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