Not every family or parent is able to contribute to college savings for their children. Depending on how many children you have, and if you plan to help them, will lay the ground work for your savings plan. Jay and his associates specialize in comprehensive investments. These include college preparation and savings plans.
The team at Numerico would love to help you with these important decisions. This includes how much you want to save, how much you can afford to save and the best way to save. Every family is unique in their ability and intention for college savings. College savings is important and a wonderful thing to provide for your child. However, it should never result in sacrificing your own emergency funds or retirement savings.
The cost of college varies, primarily depending on what type of school you choose. The average cost of community college tuition is $2,000-$3,000 per year. The national average cost for public universities are around $5,000. The average cost of private colleges and universities is $20,000 plus. In your savings plan, consider an inflation variable as well. In the last 10 years, four-year, non-profit private education has gone up 60%. In the 2012-2013 academic year, in state college tuition was increased by 3.8%.
Avenues For College Preparation & Savings
529 Michigan Education Savings Program (MESP)
You can contribute income tax-free up to $5000 a year for individual filing and up to $10,000 for couples. Funds from this program can be used for tuition, mandatory fees, books and supplies. It may also cover certain room and board costs. You may transfer the beneficiary of the fund to another eligible beneficiary in the family.
Stocks, Bonds & Mutual Funds
Sadly, tuition costs are rising faster than inflation is. When purchasing stocks, bonds or mutual funds you can remain flexible. This is because you can transfer money to whatever financial product is performing the best. It is a more risky way to save, but you also have the option to change course and use the money saved for something else. This is unlike the 529 MESP, which can only be used for education.
Bank Savings Accounts
Sometimes the turtle beats the hare. Traditional bank-based saving is the safest route to college savings. The benefits are you will not lose money and you can access the funds at any time. However, there are no tax breaks and it is generally a slow process.
College preparation and education savings should be a universal effort, especially with the rising cost of education. Your child should be involved. Plan out what they can do to help save and increase the savings account. When your child gets a job, do not be afraid to have them make a small contribution out of each check or gifts from family. Even a 5% contribution from them will increase their college education savings and instill great financial habits. The more informed everyone is the more success the college education savings plan will be. Jay and his team of associates at Numerico are experts at consulting on your savings plans!