College savings

College Savings: Learn the benefits of Starting Early

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Thanks to these three common myths, college savings can feel like an impossible task; however, the truth is bound to lift your spirits and help you get started. 

At Vance Wealth, it’s our mission to pay our experience forward, providing clarity where it’s needed most. We’re dispelling the most common myths about college savings, so you can start with the facts — and end up with a college savings plan that helps you achieve more for yourself and your children.

 Our Most Important Piece of Advice 

“The importance of starting early cannot be understated,” said Patti Handy, Wealth Advisor with Vance Wealth. “The window is short when it comes to college savings. Eighteen years can fly by compared to the decades you have to save for retirement.”

That’s why it’s so important to start early, even if you expect to save only a small portion of what you’ll ultimately need.

Three Common Myths about the College Savings Process 

  1. There’s no way I’ll save enough for college. 

Saving for college may feel like a losing battle because there’s no finite goal to hit. Until your child has decided on a college, place of residence, and more, you won’t know the exact cost of your child’s college experience. For many families, that uncertainty feels impossible, and like you’ll never have enough.

In reality, however, paying for college is rarely an all-or-nothing proposition. Most parents take a three-pronged approach: savings, financial aid or scholarships, and loans. But, of course, you don’t need to save the total amount by graduation day, and realistically, that may not be the goal.

So the trick is to change the way you think about the purpose of your college savings and set the most proactive path forward possible.

  1. College will cost $500,000 by the Time my child goes to college. 

Again, saving for a moving target can be disheartening, especially since there are many variables to consider. However, the sticker price of a college is not the true price. Multiple variables affect the true out-of-pocket cost of a college experience, such as scholarships, grants, and other financial aid.

Additionally, the money you save over Time will grow when planned and invested appropriately. If you save $200 monthly for 18 years, for example, that $43,200 saved could eventually provide for almost $100,000 of qualified education expenses*

  1. Saving will hurt my child’s chance of receiving financial aid. 

Healthy savings may not dramatically impact financial aid when planned with foresight and strategy.

For example, a 529 college savings plan, which we discuss in more detail below, is only weighted at 5.64%, which has little impact on how parents’ income is interpreted by the Free Application for Federal Student Aid (FAFSA). Additionally, there are more opportunities for financial support aside from need-based aid. Most families are available for various types of assistance regardless of need. A financial aid package may include grants, loans, subsidized aid, unsubsidized aid, and work-study. The fact is your college savings isn’t your only option. It’s just a crucial starting point.

The 529 Plan: A College Savings Solution We Love

This tax-advantaged savings account is dedicated to helping the student beneficiary cover tuition and other costs, such as mandatory fees, room and board, books, and more. The money in your 529 will grow tax-deferred and will eventually be withdrawn tax-free. To ensure the money is used appropriately, parents control the account. Additionally, the 529 Plan can now be used to save for secondary education, making it an excellent option for private-school education. Finally, the 529 plan allows the account holder to change the beneficiary’s name to a sibling or grandchild. This flexibility will enable parents and grandparents to inspire a higher education legacy passed down for generations to come.

Are you ready to take a proactive start to your child’s or grandchild’s college education? We can help. To set up a consultation with one of our Wealth Advisors, click here.

Get started early!

This quote by Gretchen Rubin couldn’t be more true:

“The days are long, but the years are short.”

Patti & Son

Pictured: Patti Handy & her son Blake

Disclosures:

*This is a hypothetical example meant for illustrative purposes only and is not meant to portray the performance of any specific investment. This is illustrating $200/month saved over an 18 year period at an 8% return.

Vance Wealth, Inc. (“Vance Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Vance Wealth and its representatives are properly licensed or exempt from licensure. The information provided is for educational and informational purposes only and does not constitute advice. Vance Wealth does not provide tax advice. You should contact your tax advisor before making any decisions with tax implications.

Rules and laws governing 529 plans are varied and subject to change. As with other investments, there are generally fees and expenses associated with participating in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider, before investing, whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s 529 college savings plans. Such benefits include financial aid, scholarship funds, and protection from creditors. The tax implications can vary significantly from state to state.

Investors should carefully consider the investment objectives, risks, charges and expenses associated with 529 college savings plans before investing. More information about 529 college savings plans is available in the issuer’s officially statement and should be read carefully before investing.