Itís Never Too Early -
or Too Late - to Save for College
(ARA) - On Parentís Day, July 27, children everywhere will thank
their moms and dads for all theyíve done for them over the years.
Every parent wants to give their children the best in life; for many
parents, part of this equation is planning for their childrenís
ďIt is never too early to start planning how
youíll help your child pay for college,Ē says Jane Ann Schiltz, vice
president of marketing for Northwestern Mutual. One look at the cost
of a college education and you know that the sooner you start saving
money, the better. According to The College Board, the average price
of a four-year education at a private university in 2002 was
$110,708. Based on average historical rates of inflation for college
costs over the past 10 years, the price tag for that same education
in the year 2020 would be $216,636. Costs at public universities,
besieged by budget cuts, have also risen sharply.
Add to the mix an increased demand for financial
aid, at a time when those funds are dwindling at colleges and
universities, and it is clear that students and their families will
be facing large tuition bills. However, despite good intentions,
almost half (44 percent) of parents are not putting money aside to
fund their childrenís college education, according to a recent
survey conducted by Harris Interactive for Northwestern Mutual.
If you are part of that 44 percent, and havenít
started saving yet, donít panic. Itís never too late to start.
Planning is the key to reaching your financial goals. If you are
overwhelmed by the thought of mapping out a plan, consult a
financial representative who can help you put together a college
funding strategy that will meet your goals. There are a variety of
ways to fund your childís college education; you need to find the
combination of options that is right for you and your family.
Schiltz offers some key points to bear in mind
when laying out your plan:
* Set your goal. The first step is to determine
how much money you will need for your childrenís college expenses.
Once you have a number in mind, you can create a plan to help you
* Get your finances in order. Saving for college
should be part of your total financial plan, not a stand-alone goal.
You need to make sure your finances as a whole are in order --
including your will, life insurance, retirement plan and other
investments in order to see how college saving fits into the mix.
* Know your options. There are many ways to fund
your childrenís education, including Coverdell Education Savings
Accounts (formerly Education IRAs), Custodial Accounts, Section 529
Plans and other investment options such as mutual funds, CDs,
savings accounts, stocks and bonds. Each of these options has
advantages and disadvantages. A financial professional can help you
sort through the choices and advise which ones best meet your needs.
* Donít forget life insurance. This may not be
the first thing that comes to mind when thinking about paying for
college, but it is an important part of your mix. Permanent life
insurance can play a part in college funding in a number of ways.
Most obviously, in the event of your death, your child can use the
death benefit to pursue their dream of a college degree. In
addition, depending on the type of policy and how itís structured,
you can draw on the cash value in your policy to bridge the gap
between financial aid and tuition. Check with a financial
professional on the advantages and potential consequences of
borrowing from your policy.
* Consider tax and financial aid implications.
Some of the college savings vehicles are taxable while others are
not. Likewise, some of these accounts will impact future financial
aid eligibility, while others wonít. Once again, a professional can
help you navigate these choices.
* Get the whole family involved. Grandparents and
other family members can contribute to the cause by using many of
the options listed above, such as Coverdell accounts and custodial
By exploring all your options, youíll gain a big
picture approach to education planning and have a better
understanding of what works best for your family.
For more information on college funding options,
visit the Northwestern Mutual Web site at
www.northwesternmutual.com. The college funding calculator can
help you estimate your funding needs. If you would like a copy of
the companyís education funding brochure, you can locate a
Northwestern Mutual Financial Network representative in your area.
Courtesy of ARA Content