*This guide is an update of Personal Capital’s 2017 College and Education Financing Guide. While this guide focuses mainly on higher education, tax reform passed in December 2017 means many of these lessons can be applied for other educational needs.
There’s no doubt about it – education can be expensive. The cost of college tuition has risen over the past few decades. In fact, the average tuition for an American private, nonprofit four-year school has seen a 129% increase since 1988.
Stories abound about the financial burdens that education expenses are placing on families, yet the emphasis on a college education for your children’s future has never been more important than now, with the pay gap between college graduates and everyone else at record highs. According to a study by the Economic Policy Institute, college graduates – on average – earned 56% more than high school grads in 2015.
It’s no surprise, then, that parents are prioritizing having a college savings plan for their children as a long-term financial goal. The average amount American parents are saving is up more than 10% from 2016, and the highest amount since 2013. And it’s still not enough.
There are many ways to pay for your child’s education, such as education savings accounts like 529 college savings plans, prepaid tuition plans, IRAs, financial aid and student loans, Coverdell education savings accounts, custodial accounts (UGMAs/UTMAs), investment accounts, and many more. But many of these savings options come with tax advantages and disadvantages, contribution limits, and other considerations that can be tricky to navigate without the proper knowledge and guidance. In addition, tax reform that passed in December 2017 may impact what you are saving and how.
Saving for Your Child’s Education Without Sacrificing Retirement
So, how do you save for your children’s education while also thinking about your own retirement savings? How much can you afford to contribute to your kids’ future without sacrificing your own long-term plans or impacting the legacy you want to leave behind?
Whether you are planning a family or already have one, now can be a great time to address this major financial goal. The Personal Capital Guide to Saving for a Child’s Education can help you learn more ways to save for your family’s future without sacrificing your own. While the guide mainly focuses on financing higher education and college costs for your children, many of these lessons can be applied to other educational needs.
It’s natural to want to give your family the best start in life possible. And with some strategic foresight and careful planning, you can still provide a head start on their future without giving up on your own.
To learn more, read our free guide on saving for a child’s education.
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