If providing a college education for your child or grandchild is one of your primary financial goals, you need a plan — an investment strategy — to help ensure that you’ll have the money when you need it.
Like providing retirement income and buying a home, paying for college is often a major expense. But unlike retirement, which you may postpone for a year or two while you build a bigger nest egg, or buying a home, where you usually pay only a small percentage of the cost up front, college generally has a specific time frame and strict payment schedule.
The most effective strategies tend to have some things in common. These are some
approaches you may want to adopt:
Start
early and invest regularly in one or more accounts
you’ve
designated for college costs.
Build
a
diversified investment
portfolio
with
the potential to provide the dual goals of growth
and safety.
Take
maximum advantage of the investment opportunities
that are designed specifically for accumulating educational
expenses.
Tuition
at most colleges and universities has increased from
5% to 13% every year since 1980 — consistently
exceeding the
rate of
inflation.
By 2026, when a child born in
2008 enrolls, four years at a private school will
cost more than $500,000 based on a 7% annual increase
in tuition costs, plus room & board, fees, and other costs. And a 4-year degree at a public in-state
college or university will cost approximately $260,000. On average, tuition rates increase annually a little less than twice the average inflation rate.
