The latest student loan statistics in 2020 (according to Forbes) show that there are approximately 45 million people in the United States with outstanding student loan debt and the average student loan debt is around $33,000. Fast forward about 15 years from now and a 4-year degree could cost you between $400,000 and $500,000 if tuition increases at a rate of about 5% per year (according to Northwestern Mutual). Those are some shocking statistics and it confirms one thing for me. I don’t want my children to graduate college with debt.
If you are thinking the same thing as me then I suggest you start saving money for your children’s college education ASAP. As soon as we found out we were pregnant with our first child, we set aside money for her future tuition. You may be wondering how that is possible, as you need a social security number to set up a 529 plan for a child. Well, we have opted to save for our daughter’s, and any future children, college education with a regular brokerage account. Why?
There are several great benefits to 529 savings plans. The best part of a 529 plan is that they are tax advantageous, meaning that the money grows tax-free. Additionally, there are no income limits, so everyone can have a 529 plan without being phased out due to income thresholds. Learn even more benefits in the blog posts below. Why, then, would we choose not to have one for our daughter?
The main reason we opted for a regular trading account over a 529 plan is that we wanted the flexibility to give our daughter this money for another purpose in the event she does not need the money for her college education. We are also very hands on investors, so we don’t mind actively managing the account over the years.
That being said, everyone’s financial situation is different and saving for college is not a one size fits all type of thing. Below are some additional resources discussing saving for a child’s college education.
Gone on Fire: Should I Invest in a 529 College Savings Plan? Really good breakdown on 529s and if they’re right for you or not.
Go Curry Cracker: Why GCCJr has no 529 Devil’s advocate for 529 plans
Perpetual Money Machine: How Should I Save for My Kids’ College?
Your Average Dough: 5 Ways to Save for Your Child’s College Education 5 different ways to save for college
How are you currently saving, or how do you plan to save, for your child’s college education?
