It's never too early to start college financial planning. The college search and application process may wait until later in high school, but saving money for college should start much earlier – even when children are infants, experts say.
"That might not be a ton of money early on, but doing a little bit over a long period of time, you have the power of compounding interest working in your favor," says Shannon Vasconcelos, senior director of college finance at Bright Horizons College Coach, a college admissions consulting firm. "Starting to think about it as early as possible and saving is a great move."
Families spent an average of $28,026 on college expenses in 2022, according to a national study by Sallie Mae and Ipsos. Family income and savings covered half of those expenses, and scholarships and grants covered 29% of the costs.
Parents can use various methods to save and plan for a child's college education. As college costs continue to rise, here are five strategies that experts recommend.
A 529 college savings plan is an investment savings account intended to be used for qualified education expenses, such as tuition and fees, housing and food. Anyone can contribute to the fund, and the money grows over time through interest.
Money can be withdrawn tax-free any time as long as it's used for education expenses. If the money is not used for qualified expenses, income taxes and a 10% penalty on the earnings will apply.
There's no age requirement for the beneficiary of a 529 plan, so parents can open it when they see fit. People who are not yet parents but plan to have children can open a 529 plan in their own name and eventually make the child the beneficiary.
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“529 plans are definitely the best way to save for college, as long as the parents start when the kid is young,” says Julie Gross, owner of College Financial Consultants, a New Jersey-based financial aid consulting agency. “As far as starting when the kids are a little bit older,........