Investing in your child or grandchild’s future education is one of the greatest gifts you can give—a gift that will last a lifetime and can help open doors to opportunities in the future. With the cost of a college education continuing to soar, it is wise to start saving when kids are young. Saving, even a little at a time, can make a substantial difference down the road.
A state-sponsored 529 College Savings Plan is a tax-smart option for saving for a child’s future education. The money you contribute to the plan grows federal tax-free, and withdrawals are not taxed as long as funds are used for qualified education expenses.
Higher Education Costs Continue to Soar
The numbers are staggering. College costs tend to increase at about two times the rate of inflation each year; a trend that is expected to continue for the foreseeable future.
Here’s what you can expect to pay for four years of college (tuition, fees, room, and board) by the time your kids (or grandkids) are ready to head off to college (assuming a steady 6% college cost inflation rate):
Source: College Savings Plan Network, College Cost Calculator
For example, the College Saving Plans Network estimates–at an inflation rate of 6%–that it will cost $261,277 to send a child (who is 2 years of age in 2022) to an in-state public college for four years (including tuition, fees, room, and board). The estimate for private college is a staggering $598,063!
Note: Want an estimate of how much it will cost to send your child or grandchild to college? Use the College Cost Calculator at the College Savings Plans Network.
529 Plans Can Help
One often overlooked college savings option is a state-sponsored 529 plan. These plans offer great tax benefits, while often allowing you to contribute substantially higher sums than other savings alternatives. (click here to read the full article.)