How can I plan for my children's education?

Children are always asked what they want to be when they grow up. Doctor. Lawyer. Astronaut. And as a parent, you want to make sure nothing stands in their way, especially something like finances.

The Cost of Learning
Funding a college education is one of the most valuable gifts you can give a child, but unfortunately, it can also be one of the most expensive.

The average cost of one year of school (tuition, fees, and room and board)*:
Public School $13,833
Private School $29,541

Add to that the historical 5% average inflation increase for college costs and these prices can skyrocket.

The average cost of four years at a public school (tuition, fees, and room and board)*:
Today $59,620
Year 2021 $143,484

You're not alone if you think a financial goal like this seems intimidating or out of reach. But with careful planning and early saving, it doesn't have to be.

Your Savings Plan
The first step in creating a college savings plan is to estimate how much money you may need. To reach this number, you should take into consideration the type of college (public or private) your child may be interested in, your time horizon and, of course, inflation.

Starting early and investing consistently are two key factors to reaching your goal. For example, look at how your savings could grow if you start when your child is a newborn.

Child's age now Newborn
Current savings for college $0
Total cost for a four-year public college in 2021 $143,484

Assuming a 7% investment rate of return, this goal can be reached with:
Monthly investment $284
Or
One lump sum investment $31,960

This calculation includes the estimated cost of college, including tuition, fees, and room and board. It assumes monthly savings will stop once the child begins college. Rate of return is for illustrative purposes only; it does not represent any currently available investments.

*Source: The College Board Trends in Pricing 2003 and Edward Jones 2003.

This is not to say that the only way to reach your goal is to start saving when your child is a newborn. And we also understand that not everyone is able to save hundreds of dollars a month - but that doesn't mean sending a child to college is any less realistic. If your savings won't be able to cover all of your college costs, other family members may be able to help and you can also look into student financial aid, scholarships, grants, loans and work-study programs.

Your Next Step
We can't stress enough the importance of early planning, but if you haven't started yet, don't panic. Contact your local financial advisor, who can help you with your savings goals and make sense of the different types of college savings plans that are available. We can also help you explore investment options and see if you are eligible for financial aid.