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Attending college is one of the most significant events in life for most people, but unfortunately, in addition to providing lifelong friendships, education, an opportunity for upward mobility and simply a fun experience, attending college can also give a person tons of stress and financial debt that often lasts a lifetime. As a parent, you probably feel both the desire to help minimize your child’s college loans and the stress that comes with even thinking about setting up a college fund. Well, take a deep breath and relax – we’re here to help you come up with a solid plan on how to save money for college for your newborn or older child.
How much does college cost in USA?
Even though there are dozens of expert opinions and projections, there is no way you can know for sure how much college tuition will cost in 10 years, let alone 18. If you’re looking for an estimate, for the past decade college tuitions have increased by about 5 percent every year and there is no sign that this trend will change any time soon. As of 2018, you can expect to pay about $34,000 per year for tuition and fees at a private university, $10,000 at a public university in your state of residence and $25,000 for public schools out of state. Of course, these figures don’t include food, housing, books, insurance, etc. But if your child will attend an in-state public school and live at home, you can get away with paying as little as $16,000 dollars a year if he or she starts college in a decade.
Set up a 529 plan
This college savings plan has helped millions of parents put their kids through college and it can help you avoid college loans too. While this plan doesn’t offer as much flexibility as other savings plans offered by individual banks, meaning you can only spend the money in the account on college-related expenses, it allows you save money and gain 6% per year on the funds tax-free. In a situation when your child decides he or she doesn’t want to go to college, you lose only a small portion of the money – 10% of the value you’ve gained. For example, you saved $80,000 dollars over the years and gained $24,000 dollars in value. If you want to withdraw money instead of using them to pay for college, you will only lose $2,400 dollars, which is not a bad deal.
How much to save for college by age
The key to success when you’re trying to save for college tuition is starting as early as possible. For instance, if you decide to save 300 dollars per month starting at your child’s birth, you will have saved $64,800 in contributions plus $46,000 in gains, giving your child $111,200 to spend on college by the time they are 18. If you start when your child is 3 years old and contribute the save $300 a month, you can save $83,800, if you start when your child is 8, you will have $47,400 to spend, and even if you start saving when your child is 13 years old, you can still save $20,300.
Finally, try using Cubux home budget app to keep track of your college savings, expenses and income. The app allows you to manage your spending better so you can contribute more to your college or retirement savings – and that’s always a win!