According to recent data published by the College Board, the annual cost of attending college in the US in 2017–2018 averaged $20,770 at public schools, plus an additional $15,650 if one is attending from out of state. At private schools, tuition and fees averaged $46,950.
Here are some quick tips as you start thinking about saving for college costs:
- Consider a tax free savings vehicle, such as a 529 account
- If funds within a 529 account are not used for qualified education expenses, there is a penalty. Therefore, avoid over funding the 529 and coupling the 529 savings strategy with another type of investment account that gives you more flexibility with the money
- Start saving early
- Invest in funds with low expense ratios
- Consider your state sponsored 529 plan first for possible tax advantages; if your state’s plan is not sufficient, then consider another state sponsored 529 plan
- The time frame for saving for college is compressed (only about 15-20 years). Therefore, it is important to shift from riskier assets (ie stocks) to safer assets (ie bonds) as the child gets older
- Starting in 2018, 529 plans can be used to pay for tuition at private elementary and high schools.