EDUCATION
College saving suggestions that won’t break the bank
Caribbean Life, Aug. 30, 2019 43
The cost of college tuition concerns parents
from all walks of life. While college continues
to get more expensive, it remains a worthy investment.
In its 2015–16 “College Planning Essentials”
report, J.P. Morgan Asset Management dispelled
the growing notion that a college education is not
worth the student loan debt many young adults assume
to earn their degrees. The report noted that
college graduates earn 38 percent more than high
school graduates, even after factoring in student
loans. The report also noted that the return on
investing in college is nearly $1 million more in
lifetime earnings. What’s more, a 2013 report from
the Georgetown University Center on Education
and Workforce projected a shortage of fi ve million
college-educated workers by 2020, suggesting that
college graduates will be in high demand by the
start of the next decade.
While such fi gures highlight the importance
of a college education, they may do little to ease
parents’ concerns about how to fi nance that education.
Saving enough money for college may seem
impossible, but parents can take steps to decrease
the likelihood that their kids will need to take on
substantial loans to support their education:
Start early
The earlier parents start saving for college, the
more money their children will have to fi nance
their education. Parents may not realize just how
much college tuition is rising compared to other
expenses. According to the U.S. Bureau of Labor
Statistics Consumer Price Index, the cumulative
percent price change of college tuition between
1983 and 2015 dwarfed the price changes of other
expenses.
For example, while the cumulative price change
of housing rose 143 percent during that period, the
cost of college tuition rose 722 percent over the
same period. The earlier parents start saving for
college, the more they can take advantage of compound
interest that many college savings plans offer.
Schedule automatic monthly
contributions to savings accounts
Parents learn to expect the unexpected soon after
their children are born. Unforeseen expenses
may tempt parents to reduce or skip their monthly
college savings account contributions. Reduced or
missed contributions can add up over time, however,
potentially reducing the totals in your child’s
account by a substantial amount.
Set up automatic contributions with your bank
or portfolio manager so you are not tempted to use
the money you set aside each month for college to
fi nance other expenses.
Increase contributions each year
Increasing your annual college savings contributions
each year can help the accounts keep pace
with the infl ation rate of college tuition costs.
While you might not match that rate, increasing
contributions each year by as little as fi ve percent
won’t greatly affect your overall budget but can
have a considerable impact on college savings.
Saving for college can seem like a daunting
task. Yet parents of young children can quell their
fears about college tuition costs by making a plan
now and sticking to it until kids are ready to enroll
in a college or university.