By Brenda Mathis, Program Director, & Merzie Davis, Financial Manager, DC College Savings Plan
October 26, 2015
A little goes a long way when it comes to saving for college
You make dozens of financial choices every single day. Even the smallest ones can lead to a big payoff in the future.
Whether it’s what you eat, how you entertain your family, the transportation you use or just about any other daily expenditure, it’s important to understand where savings on everyday spending can be put to better use.
For example, in any given month just a few family trips to a fast-food restaurant and a purchase of the latest new toy or video game could easily add up to $100 or more. The ball games, movie tickets, latest apps and music downloads? Those prices add up to hundreds of dollars quickly, too! Investing just a portion of that money can have a meaningful impact on your children’s futures.
College is becoming more important than ever. By 2020, 65 percent of jobs will require more than a high school diploma*. That number has more than doubled since 1973, when many of today’s parents were children. Many people feel like it’s hard to find the extra money to invest and end up putting off saving for college.
This time of year, that small white chocolate mocha at Starbucks looks pretty good but considering the fact that its $3.65** price tag could get you about 30 packets of Swiss Miss*** instant cocoa, maybe taking the few extra minutes to make your own can translate into additional college savings.
The average movie ticket now costs $8.61, according to the Hollywood Reporter. That’s $34.44 for a family of four. Instead, why not rent on-demand for $5 this month? Keep your family entertained for less, and put the savings toward education. Consider what you’ll accomplish if you undertake just a few small acts of cost-cutting like that each month of your child’s life, instead putting that money into a 529 College Savings Plan.
Investing just $50 per month for your child’s first 18 years would translate into $19,465 in savings, based on a hypothetical 6 percent return rate. If you bring your lunch to work once or twice a week instead of grabbing takeout, you could easily find another $50 to save each month. If so, an investment of $100 per month into a 529 plan could turn into almost $39,000 when he or she is ready for college****.
Take a look at where you spend your money each day. Where can you find that extra $100 every month?
*Georgetown University, RECOVERY: JOB GROWTH AND EDUCATION REQUIREMENTS THROUGH 2020, June 2013 [http://cew.georgetown.edu/recovery2020].
****This hypothetical example is for illustrative purposes only and is not a guarantee of future results. The hypothetical example assumes an annual rate of return of 6% with no fluctuation in principal. It does not represent an actual investment in any particular 529 plan and does not reflect the effect of taxes, plan fees or expenses. Your actual investment return may be higher or lower than that indicated.