Effective college planning and saving in this economic downturn is not an easy task for parents. Even when one has the intention to save, setting money aside when there are several other bills to pay on the table is ever challenging. But don’t be carried away by the idea that you cannot save. Because it is a family or personal affair, you don’t have to cover every penny. Most parents don’t have to indebt knowledge of how much a college would cost. So, none of their children are yet a high school senior. In line with this, therefore, they tend to depend solely on scholarships.
Today, virtually all parents are facing the challenges of initial withdrawal target date. And this has been a major factor that is discouraging them from investing in college savings. So it adheres firmly to the principle exposes parents to a certain amount of time to succeed in their dream aim. Furthermore, most parents find it very difficult to regain from any loss that may have affected them along the line. One of the recent (2017) surveys conducted by Sallie Mae has, however, revealed that 86% of families have the intention of sending their children to college. But only 39% have made plans when it comes to making necessary payments. The truth is that virtually all parents dream to have the best investment return for their children’s college savings. But are they taking the basic and necessary steps for a ‘dream come true’ college savings? Moreover, after failing to save, most parents only end up contributing in some ways like taking care of living-at-home expenses amongst others.
ScholarShare’s recent survey has revealed parents are having college savings account, irrespective of the balance to feel happier and more secure. But the reverse is the case with those without any account. This is because paying for their children’s college tuition and other related fees will be more tasking. Most parents fall victims of not saving for their children’s’ college fees due to certain myths. For this reason, it is important to know these myths, as knowing them will help them avoid falling for them. The most interesting thing is that having an indebted knowledge and taking the right action against these myths will go as far as offering parents peace of mind.
These myths are, however, painstakingly discussed below:
1) College is Still Far Away
Funny enough, most parents fail to realize that time will never wait for them. Certain events like a child’s first birthday and even promotion from one class to another can serve as ways which parents can devise a means to remind them to save. A child’s transition from junior to senior high school can also serve as a reminder or wake-up call for parents to save. The truth remains that starting early and often saving (and even if it’s a penny) goes a long way to enable parents to enjoy the benefits associated with compound interest. Furthermore, early saving enables parents to perfectly tackle virtually all expenses associated with sending their children to college. Additionally, it will sure make them appear more expensive and aesthetically pleasing when compared with their fellows. So, when the kids get older, their needs become wide and expensive. In line with this, therefore, to avoid falling a victim, it is paramount to start saving on time and consistently.
2) There’s No Need to Start Saving
Most parents fail to acknowledge the need for college savings. This is because to them college planning is needless. However, if you don’t always see the need to start saving, it is important for a beginner to start by investing in 529 plans that have been designed irrespective of one’s income level and financial know-how. It will thus expose you, as a parent to the needs and importance of college savings.
3) The Market Will Hit A Downturn
The simple truth is that virtually all investments have one or more risks that are associated with them. And college savings is not an exception. Now, let’s assume that there is a market downturn, and your child is at a younger age. There is always time for market recovery. On the other hand, if it happens to occur when your child is older, your tax-advantaged educational investment account must have transitioned to a more innovative one and would be protected. If therefore, you don’t want to take any chance, you can seek the services of a financial advisor and after that get your money transferred into a tax-advantaged educational investment account as soon as your child enters college.
4) Kids Are Getting Financial Aid If Parents Fail to Save
Lucky enough, your kids may get financial assistance. But the question is ‘will that be enough?’ The bitter truth is that most parents have failed to understand that their children might not qualify for anything financial aid like scholarships apart from student loans. One thing is that financial loans must be paid later. For this reason, it is important to invest in college savings account, as it is the best alternative. Interestingly, parent savings are far much determined at lower rates. This is because colleges tend to require them to bring 5.64% of their nonretirement assets after determining valuation allowance. It implies that if parents’ nonretirement assets happen to be $5,000, then just $272 will be designated for children’s college. Although, being an insubstantial thing, saving smaller pieces from time immemorial has played pivotal roles and paved ways for parents from falling victims of college savings myths.
5) Not Enough Money to Start Saving
You don’t need to wait until you have a big amount of money that deserves attention to start saving. As a beginner or a low-income earner, it is advisable to start by opening a 529 plan that sometimes needs as low as $15. To start saving, cut down expense on less important things like purchasing more holiday toys, shopping, and clubbing amongst others. You can also seek financial assistance from friends, well-wishers, loved one, and relatives.
6) Fear of Possibility of Not Making Even a Dent in the Near Future
The cost of sending a child to college is rising with the passing of each day. But, that is not enough reason to give up on investing in college savings. The truth is that you will even be overwhelmed to discover that you have saved a reasonable sum if you start early. As far as sending a child to college is concerned, parents don’t need to single handily save the total sum that would be required. Help may come at any point in time.
In a nutshell, it is easier and less tasking to save for college in smaller pieces through proper planning and saving or by investing in a 529 savings plan than allowing oneself to fall victim of any of these college savings myths. Amazingly, saving gives you a good and unique sense of direction and most importantly a goal to achieve at a stipulated time.
