Financial Planning Tips to Pay for College

After a house and several cars, college is one of the largest expenses that many families face. In 2017-18, the average cost of tuition and fees was $9,970 for public colleges (for state residents) and $34,740 for private colleges.

Despite the high cost, an investment in a college education is generally worth it. According to a studyby Georgetown University, the difference between the lifetime earnings of college and high school graduates is $1 million and the difference between the highest- and lowest-paying college majors is $3.4 million.

Below are three college financial planning tips:
¨      Do the Math- Estimate the cost of a college education with an online college savings calculator. Select a few “representative” types of schools such as a community college, state university, and private college.

 

¨      Match College Savings Time Horizon and Investments- Consider stock mutual funds for college savings for children in elementary school and younger. Once a child enters middle school, gradually shift into fixed-income (e.g., short- and intermediate-term bond funds) and cash (e.g., money market fund) assets.

 

¨      Start at a Community College- Transfer later to a public or private four-year institution. Students have the dual advantages of eventually receiving a bachelor’s degree from a four-year college and saving thousands of dollars of savings on tuition, fees, and room and board expenses. Check with both schools in advance about guaranteed admission agreements, course prerequisites, and requirements to transfer credits.