Aug 4, 2020
In this episode of “College Savings Talk,” we tackle two of the biggest questions facing parents as they save for their family’s higher education goals-“when should I start saving?” and “how much should I save?”
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Intro - 00:00
Hello,
everyone. Welcome back to “College Savings Talk,” where our goal is
to add some clarity and remove a little anxiety from your higher
education decision-making process. Today’s episode is brought to
you by Edvest 529, Wisconsin’s 529 College Savings
Plan.
Planning for your family’s higher education future using Edvest 529 is a proud Wisconsin tradition like Summers spent Up North, Fall Football and Friday fish fries. Today’s discussion will hopefully make that planning a little easier for you.
Topics – 00:40
The topics we’re discussing are the
ever-important questions, “When should I start saving for my
child’s or grandchild’s college or technical college education?”
and “How much should I save?” Let’s take one at a time and start
with when you should start saving.
Question Number -
00:56
The
answer, which should come as no surprise to any of you, is as early
as possible. Now since I don’t want to host the world’s shortest
podcast, let’s take a look at why it’s so important to save
early.
Two words for you: Compound. Earnings. The sooner you get money into an investment vehicle, like a 529 plan, the sooner those funds can start working for you in the form of earnings. Over time, any earnings are invested back into your 529 account so that earnings keep building on your principal (the original amount you invest). This is a powerful principle of long-term investing.
College tuition and fees continue to rise. And while it may seem like college is light years away for your child, it’s going to be here before you know it. Unfortunately, once the months and years tick away, you simply cannot get that time back to take advantage of the compound earnings you could have accrued.
So in short, it’s best to start investing as soon as possible. But even if you weren’t able to start as early as you would have liked, it’s OK. It’s important to remember it’s never too late to start saving for higher education in a 529 account. Even if your children are older, you can still open an account and begin making contributions right away. If you find yourself falling behind, encourage grandparents or other family members to make contributions as birthday, holiday and graduation gifts with Edvest 529’s Ugift. Always know, even if you don’t save as much as you intended, every little bit can help make college or technical college a reality for your child.
Question Number 2 - 02:44
Let’s
tackle the other big question -“How much should I save for my
child?”
To be honest, there really is no right or wrong answer to this question. It comes down to personal choices and your economic situation. That said, I wouldn’t be doing my job if I didn’t give you a little more information on this potentially perplexing question.
Let’s start with the dollars and cents information. While some families may have the goal of paying for all or a most of their child’s higher education, economic realities may prevent that from happening. In cases like this, it’s important to remember even modest savings can really add up. Every dollar saved today could be one less dollar borrowed tomorrow. Let that sink in a little bit.
If you need help setting a savings goal or understanding how much you can save, Edvest 529 provides a College Savings Planning Calculator on our website, Edvest.com. This is a very helpful tool when developing a plan for saving, as the calculator provides a wide range of variables and actual cost data from most colleges and universities in the country. Try different saving scenarios and then set your plan. Don’t forget, you’re not locked into a set contribution amount or schedule with a 529 account. If you need to pause, you can. If you receive a raise or any type of windfall like a bonus or inheritance, you may wish to invest more.
Additional dollars and cents factors are the type of higher education your child will pursue and where they choose to pursue it. Wisconsin’s proud educational tradition, one that has benefited from the importance Wisconsinites place on higher education, has resulted in America’s Dairyland housing a number of world-class higher educational institutions. That said, perhaps your child has their heart set on an out of state school. Well, that could result in higher tuition and a higher cost of living plus travel.
Also, thanks to the flexibility found in 529 plans, funds can be put towards tuition and other qualified expenses at colleges, technical colleges, public schools, or private institutions. As I’m sure you’re aware, the costs of these programs vary tremendously, so the type of higher education your child seeks could play a critical role in determining how much you need to save.
But economic realities aren’t always the deciding factor in determining how much a family puts away for college savings.
Perhaps you don’t want your child burdened with too many jobs during their college years or you’re concerned with high student loan debt once they graduate. A study* shows nearly half of Americans who took out student loans would not do so again; due to the negative impact those loans have had on their overall financial security. These are all factors that may push you towards consistent savings habits for your family’s college education.
Conversely, you may want to teach your child the realities of fiscal responsibility by having them pay for a portion of their own education – either by helping save while they are in high school or in paying off some student loan debt after college. In this case, your savings goal may be more moderate.
So, to come full circle, there really is no right or wrong answer to the “How much should I save?” question. Factors like economic realities, where your child wants to attend school, the type of higher education they seek, and personal preferences will all play a role in determining your final approach.
Conclusion - 06:37
I
know saving for college can seem daunting, but as you just heard,
you have plenty of tools and strategies available to help you along
the way.
You can get started today by opening an Edvest 529 account or simply learn more by visiting us online at Edvest.com. You may also speak with an Edvest 529 college savings representative, Monday through Friday, at 1-888-338-3789.
In our next episode, we’ll talk about how Wisconsin companies can help employees save for college.
Thanks for listening.
Disclosures
- 07:20
To
learn more about the Edvest 529 College Savings Plan, its
investment objectives, risks, charges and expenses, please see the
Plan Description at Edvest.com. Read it carefully. Investments in
the Plan are neither insured nor guaranteed and there is the risk
of investment loss. If the funds aren't used for qualified higher
education expenses, a 10% penalty tax on earnings (as well as
federal and state income taxes) may apply. Check with your home
state to learn if it offers tax or other benefits such as financial
aid, scholarship funds or protection from creditors for investing
in its own 529 plan. Consult your legal or tax professional for tax
advice.
TIAA-CREF Tuition Financing, Inc. (TFI), Plan Manager. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributor and underwriter for the Edvest 529 College Savings Plan.
FCM-2667578PR-Y0324X
*From Northwestern Mutual Life’s 2020 "Planning & Progress" study