Do you have a little one? Two little ones? Three? That’s awesome! I have 2 myself that I hope one day will go to college, become successful in their career, and eventually take care of me when I’m old and have a full head of salt and pepper hair. But let’s back track a bit here. How much do we need to start saving for college?
According cnbc.com a college degree could cost up to $500,000 in 18 years. I don’t know about you, but I don’t have that kind of money saved up. Let alone for one kid, but I have to save that tuition money for TWO little monkeys. I guess it’s time to get my save hustle on.
What’s the optimal way to save for my kid’s college tuition?
There’s 2 options that I would recommend for saving for your kid’s college tuition. Both are great and are ideal in terms of taxes.
- Education Savings Account (ESA) – If you can save $2,000 a year (after tax) per a child, I strongly recommend this savings account. Your money will grow tax-free and will produce a much higher rate of return than a general savings account. Note that there’s a few requirements like meeting a minimum income amount, you must use the savings amount by age 30, and you are limited to only a $2,000 a year contribution.
- 529 Plan – Unlike an Education Savings Account (ESA), you can contribute a LOT more (up to $300,000 depending on state), there’s typically no income requirements based on age, and similar to an ESA, a 529 plan grows tax-free. Also, if in 18 years, your child decides not to go to college, then you could transfer the 529 plan to another beneficiary. Some plans even allow you to transfer to you (the parent). You just have to pick the right plan.
Why Save up for College Tuition?
Close your eyes for a minute and imagine this. It’s 6:32 PM, you just got home from work, and your 18 year old daughter comes running towards you with pure excitement. But before she could get the words out, you ask “what happened, what happened?” Then she exclaims with sheer joy, “I got into Harvard!” Your life then flashes before your eyes as you recall teaching her the ABCs, how to tie her shoes, helping her with her 7th grade science project, and motivating her to work hard and follow her dreams.
The College Tuition Save Hustle Challenge
Although it may be a stretch to say that we need to save half a million dollars for our children’s college tuition, it is still very likely that they will want to attend a college. So I encourage you to get your save hustle on and start a college tuition plan today. Just get started. You’ll thank yourself in 22 years when you see your baby girl in a cap & gown walking to receive her diploma. As your screaming for joy and blowing an air horn in someones ear, you’ll see her confidently grab her diploma that she worked 4 years to earn, then spots you in the audience… smiles…. waves… and says under her breath “thank you.”