How to Start Planning for College
What Is The Best Way To Save For College?
Saving for College can be daunting. Between paying the mortgage, utilities, car payments, insurances, and everything else, saving for college is often last on the list of priorities. We know it’s important, but it seems far away. But really, it isn’t. Whether it’s your child or grandchild, you want to give them the best head start possible.
Time is your greatest asset, so start as early as you can. There are some great options to start a saving plan for your child or grandchild. For someone that wants to help a grandchild with college, an IUL (indexed universal life policy) is a great way to set up a plan that builds cash value over time that can be tapped for college expenses.
For parents, you might consider a 529 plan. The contributions grow tax-free and are used for educational purposes only. A nice benefit to a 529 is that many have age-based asset allocation and the contributions can be deducted monthly from your checking account.
Like any major life-cycle expense, college costs should be spread out over time. A general rule of thumb uses the one-third rule, meaning that roughly one-third of the cost comes from past income (savings), one-third from current income, and one-third will come from future income (loans). But there is a balance between loans and savings. If you want to reduce loan debt at graduation, save as much as you can: It’s cheaper than borrowing money.
For more ideas on where and how to save for college, set up a call or drop us a note and we’ll be happy to help.
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