Saving for College

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Is college tuition worth the expense?

A college degree makes financial sense. Over a 40-year career, the average college graduate can expect to earn approximately 73% more than the typical high school graduate.* On top of this, data shows that the earnings differentials by education level have increased for both men and women over time.

 

A college degree is a good investment for your children’s future, and your Hilliard Lyons Financial Consultant can help you craft a plan for financing their education.

 

 It can be hard to focus on putting away money for college when you have other, competing financial obligations. You may be saving for retirement, paying off your mortgage and funding everyday expenses such as your utility bill or family vacations.

 Yet, it is important to start saving as much as you can, as soon as you can. This way, you can benefit from the magic of compounding interest. In addition, the sooner you begin to save, the more you will accumulate by the time your child enters college, and the less you have to put away each month to meet your total savings goals. Compare the savings of families who each put away $200 per month toward college tuition, but start saving at different points in time. In this example, the family who starts saving when their child is born will have accumulated $84,184, compared with $10,994 accumulated by the family who waited until their child entered high school to begin saving. In order to catch up, that family would have to put away $1,532 each month in order to reach a savings level of $84,184 when their child enters college.

Assuming a rate of return of 7% for $200 per month for:

  • 18 years (starting when your child is born) $84,184

  • 13 years (starting when your child enters kindergarten) $49,869

  • 4 years (start when your child enters high school) $10,994

While it is certainly better to start saving as soon as possible, it is never too late. Hilliard Lyons can help you create a strategy for paying for the cost of higher education. We’ll help you determine which types of investments, such as a Coverdell ESA, a 529 Plan or traditional investment options like stocks, bonds or mutual funds, are right for you.

DID YOU KNOW? The average four-year public school education costs just under $13,000 per year today, while the average four-year private school is just over $30,000 per year.**

 * Sandy Baum and Kathleen Payea, “Education Pays 2004,” CollegeBoard, 2005.
** “Trends in College Pricing” CollegeBoard, 2006.