One of my college professors taught me the mantra "Save early, save often." I try to put it to use in my budgeting/financial planning for our family. I believe that it is never to early to start thinking about the future. Jeff and I plan on funding Matthew's college education, so what better time to start saving than now?
We chose to go with a 529 savings plan. Why is this a good choice? The earnings portion of any distributions used to pay for qualified higher education expenses will be free from federal and Michigan income tax.
If you are thinking of funding your child's education, here is an idea of what you will need to save.
Using the following assumptions:
- You plan to fund your child's tuition 100%
- 4 years at an in-state University
- 6% tuition inflation rate
- Intial investment of $0
- 17 years to save before college
- 6% assumed rate of return
You will need to save $287 / month to fully fund your child's college expenses.
A 529 Savings Account is very easy to open. Jeff and I opened an account for Matthew before he was even born. An added bonus, is that you can set up an automatic payroll deduction, so that a portion of your paycheck goes straight to your child's account. Not bad!