By Lauren Shipley
Public Relations and Marketing Manager College Savings Plans of Maryland
February 20, 2013
That age old saying, “time is money,” really is true—especially when it comes to saving for college. The projected costs of tuition can be shocking; but while some figures may seem unattainable, every dollar saved today could be a dollar less borrowed later. Each family has its own unique situations and goals when it comes to saving for a child’s future college education. Each State has a 529 plan that can help, regardless of how little or how much you can afford. Many offer initial monthly contribution amounts around $25 – for many families that is just one less pizza night a month.
Doing the math, saving just $25 a month adds up to $300 per year. Over 10 years, that’s $3,000 that you would not have to borrow and pay interest on in the future. And this does not consider market fluctuations on the investment, nor qualifying for the possible state tax incentives for your contributions. Conversely, if you took out a four-year loan for $3,000 with a 5% interest rate compounded annually, it would accumulate more than $600 in interest. This means that saving $3,000 for college could potentially save you $600 in the long run.<
Consider the cost of not getting started and putting things off another day. Let’s say you start with $200 a month from the time your child is born. Assuming a hypothetical 7% compounded monthly return on your investment, you could have approximately $86,647 saved by the time they are 18. But if you start when your child is 5 years old, you would have to save $140 more a month or $340 to reach a similar savings amount. What if you wait to their teenage years? At age 15 you would have to save $1500 a month to hope to reach the same savings amount.
So, put time on your side and seriously consider starting to save for your child’s higher education now! Even starting small can make a difference when you plan ahead.
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