Research shows that the cost of education has risen 3-fold over the last 20 years.
Here’s a chart from U.S. News & World Report that illustrates the average tuition growth across universities from 2002 through 2022.
These numbers are staggering, exclude room and board, and only seem to be moving in one direction – UP.
One way to help prepare for future college costs is to set up a 529 plan, and start saving early.
A 529 plan is an investment account designated to be used for future education expenses. An account can be set up as soon as your child or grandchild has a Social Security Number. Your investment in the 529 account grows on a tax-deferred basis and can be withdrawn tax-free, so long as it’s used to pay for qualified education expenses. An added tax incentive is that many states offer an income tax deduction for contributions made to their specific plan.
The number one question I get from my clients is, “How do I know how much to save?” There’s no one-size-fits-all response to this. As you’re evaluating how much to contribute, it’s important to understand what your goals or objectives are for this account. Do you want to fund it all? Would you feel better if your child or the child’s parent pays for part? Once you have a feel for the level of funding you’d like to achieve, there are tools we can utilize to help model the savings required to get there.
Another question I often get is, “What if my child doesn’t end up going to college?” Plans change. Fortunately, 529 plans offer flexibility.
What if your child decides not to go to college, or vocational school, takes a gap year, or gets a scholarship? Rest assured, you have options.
And with the passing of The Tax Cuts and Jobs Act in 2017, families can now use 529 plans to pay for up to $10,000 in tuition expenses at elementary or secondary public, private or parochial schools.
Moneta Group Can Help
Education funding is just one of the multiple areas of planning that we partner with our clients on. If you have more financial questions, don’t hesitate to ask your Family CFO.
We do more so you can too. Contact us with any questions.
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