Getting a Head Start on College Savings

By Keith Borgfeldt –

The United States Department of Agriculture estimates a middle-income family with a child born in 2015 can expect to spend about $275,000 to raise that child to the age of 17. That is roughly equal to the median value of a new home in the U.S. And if you have already traded that super-charged convertible dream for a minivan, you can expect your little one’s college education to cost as much as $336,132.

But before you throw your hands up in the air and send junior out looking for a job, you might consider a few strategies to help you prepare for the cost of higher education.

Take Advantage of Time

The time value of money is the concept that the money in your pocket today is worth more than the same amount
will be worth tomorrow, because it has more earning potential. If you put $100 a month toward your child’s college education, after 17 years’ time, you would have saved $20,400. But that same $100 a month would be worth over $32,000 if it had generated a 5% annual rate of return. The bottom line is, the earlier you start, the more time you give your money to grow.

Don’t Panic

Every parent knows the feeling. One minute you are holding a little miracle in your arms, the next you are trying to figure out how to pay for braces, piano lessons and summer camp. You may feel like saving for college is a pipe dream. But remember, many people get some sort of help in the form of financial aid and scholarships. Although it is difficult to forecast how much help you may get in aid and scholarships, they can provide a valuable supplement to what you have already saved.

Weigh Your Options

There are a number of federal and state-sponsored tax-advantaged college savings programs available. Some offer prepaid tuition plans and others offer tax-deferred savings. Many such plans are state sponsored, so the details will vary from one state to the next. A number of private colleges and universities now also offer prepaid tuition plans for their institutions. It pays to do your homework to find the vehicle that may work best for you.

As a parent, you teach your children to dream big and believe in their ability to overcome any obstacle. By investing wisely, you can help tackle the financial obstacles of higher education for them—and smooth the way for them to pursue their dreams.

Fast Fact: According to the College Board in 2015, the average tuition for public four-year institutions in Texas was $9,120, just below the national average of $9,410. Over the past 5 years, this amount has increased by only 8%, well below the U.S. average of 13%.

Keith Borgfeldt is president and owner of Spartan Wealth Management, LLC. Securities and investment advisory services offered through NEXT Financial Group, Inc., Member FINRA and SIPC. Spartan Wealth Management, LLC is not an affiliate of NEXT Financial Group.