With the ever increasing education costs of today, it has become extremely hard to decide on the amount of money that needs to be saved to ascertain that your kid reaches college. Sure your kid might not go to college and instead decide to be RMT North Vancouver, but you can’t count on it! Even if you are a late bloomer in the savings category, there is not much that is lost, yet! Let me help you wade through all the complex parts of savings and the kind of money that you need to save for your child.
The preemptive cost of education.
It would be safe to say that in the coming years, a period of let’s say 16 years for argument’s sake, the cost may have escalated to a staggering $250,000 minus the aids. That is a lot of money to save, isn’t it? Due to a great economist by the name of Mark Kantrowitz, it wouldn’t sound like an insurmountable figure anymore.
He recommends breaking down the cost into three parts, the first part being the money saved from your present income, another third used from the current income generated for the duration of the college and the last third from loans. If you plan on not taking any loans, you may keep the savings to two-thirds. After all, every dollar that is taken as loan ends up being paid back as $2, while your savings would, in turn, earn you interest. Here is a video of Mr Kantrowitz talking about student debt.
When to start?
Right now! there is no better a time to start than the present, if you start right away you would have to save lesser per month compared to starting at a later point. Plan for the savings, make a goal that you want to reach and divide the cost equally over the month and the year periods.
You may start with a sum of $250 per month if you plan on taking loans, or a sum of $500 if you plan otherwise, this is an approximation based on the tuition fees of the average American colleges. The cost may differ for the elite schools, due to their assistance programs, and could, in turn, be lesser as compared to the other schools. The how much part broadly depends on the kind of college that you have in mind for your child. You should also definitely start preparing your child for college in elementary school.
If you want to avoid having to cope up with undue pressure at a later point of time, having to foot loans and then pay the mighty interest later, it is highly advisable that you start saving today, since, every dollar that you save today would be $2 less that you or your child may have to pay as interest.