Eighteen years ago, my wife and I found out we were going to have a baby. We immediately began thinking about college and paying for it. Both of us had received the gift of college from our parents and agreed that we would provide the same for our children. We knew that saving for college was going to take using all the tools available to us.
State Prepaid Tuition Plans
We were lucky enough to have the Texas Tomorrow Fund available to us just before they closed it to new enrollments. Basically, the plan allowed us to purchase years of college at the current price knowing that in 18 years, the cost would be much higher. The state has since replaced this program with other opportunities to save for college including a qualified 529 Plan.
529 Plans
A 529 Plan is a tax-advantaged way to save for future education expenses including college. In most cases, the money you put into one of the plans is invested so that it can grow over time. Each state offers a 529 Plan which have different features which may appeal to people for different reasons. For example, we chose the Nevada plan based on the ability to invest in certain mutual funds.
If you don’t feel comfortable enough with investment matters, most of the plans have an age based option that adjusts automatically based on the age of the beneficiary of the 529 Plan. Which brings up an important point about 529s which is the ownership of the fund and what happens if the beneficiary doesn’t end up going to college. You can either name a new beneficiary who is a family member or take the cash out with penalty.
Choosing a College
I had no idea that the search for colleges to attend took place so early in high school. Thankfully, my wife is a teacher and is in the know. She began taking my oldest on college visits as a sophomore. Once she had decided where she wanted to go, my wife sent her to summer camps there and made contacts with the admissions team.
The sooner you start on this journey, the more tools are available to you. I encourage parents or soon to be parents to have a serious discussion about planning for college.
For even more tools available to you, I recommend a very comprehensive article on paying for college by one of my teammates. It is worth a look, and since you’ve made it this far in this post I’m assuming you have some interest in the topic.
Post author: Jamieson Mackay, CCUFC
The opinions expressed on this page are for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author of the article and may not reflect the views of the credit union.