04 Jan 4 reasons why you should save money for your children`s college
With a baby on the way, parents often start to think about their future. Thoughts like: What will my kid be in the future? Should we start saving money for a college education? But what if she/he doesn`t want to go to college?
Virtually everyone thinks saving for college is important, but according to the College Savings Foundation, just over half are actually putting money away for their child’s education.
Saving for a child’s college education creates and continually reinforces the expectation that the child will enroll in college. This improves the student’s academic performance and increases the likelihood that the student will enroll in and most likely graduate from college.
There are many reasons why parents should save for their children’s college educations.
Today we bring you FIVE of what we think are the main reasons you SHOULD start saving now for the future of your children.
- It expands college choice. College savings provides the family with flexibility in college choice, allowing the student to enroll in a more expensive college that is a better fit to the student’s academic and career goals.
- It is ALWAYS cheaper to save than it is to borrow. If the parents save $100 a month for 10 years at 7% interest, they will accumulate approximately $17,410. If instead of saving this amount, they borrow the money at 7% interest, they will pay $202 a month for 10 years, more than twice as much.
- It reduces student loan debt and the chances of hurting your son/daughter`s credit . Even if the family starts saving late, a dollar saved is a dollar less borrowed. Every dollar borrowed will cost about two dollars by the time the debt is repaid, given the usual mix of interest rates and repayment terms.
- The penalty for college savings is minimal. There is a slight reduction in eligibility for need-based financial aid, if the college savings are in the parent’s name. (A 529 college savings plan owned by a dependent student is treated as though it were owned by the parent.) Even with the savings penalty, the family has more money to pay for college than a family who did not save. For example, $10,000 saved in the parent’s name will reduce aid eligibility by at most $564. This leaves the family with $9,436 available to pay for college costs.
- Savings are still SAVINGS. If in the end the time comes and your child decides to not go to College (and hear me here, let’s suppose you only had one child and cant give the college money to the second son or daughter) You would still have savings. whether you decide to give it to your child to start a business or an independent life or you keep it to start a retirement plan Savings are still Savings.