We moved back to Little Rock 13 years ago with our twin toddlers. One of the first things we did was open 529 accounts for them. We suspected that college would be here before we knew it. As a young family with one income, we couldn’t save as much as I would have liked. Now, at the other end of the college planning spectrum, I am so thankful that we started saving early. It has provided more options as we enter these final years before college. Starting college savings early is crucial since plans can be fluid as a child grows. Here are some things to keep in mind at different ages.

Birth to Preschool

We recommend that you begin saving as soon as possible and a 529 account is a great tool for this goal. You will benefit from tax-free growth on funds that you use for qualified education expenses. The earlier you start saving, the greater the benefit. While college goals may not be fully developed at this point, we can help you determine an appropriate savings level to get you started without jeopardizing your other goals.  

Elementary and Middle School Years

During the elementary years, it is important to continue saving and to monitor progress toward your education goals. Goals are likely to become clearer as your student gets older. As you refine your goals, consider:

• What type of education you want to fund: public vs. private; in-state vs. out of state?
• How many years do you want to fund: just undergraduate or graduate/professional degrees as well?
• Do you want to pay 100% of all costs or do you want them to have “skin in the game”?
• Is there a specific dollar amount of tuition costs that you would like to pay for each year?

We do not recommend that you invest the entire cost of college in a 529 plan because of the restrictions on withdrawals. This is a good time to diversify college savings and begin adding funds to an account that will give you greater flexibility and control. In addition to savings, help your student develop good study habits and work ethic around schoolwork. This will help prepare them for high school when the stakes are higher, and grades will impact their scholarship opportunities.

High School

Serious college planning begins in high school. By this time, you’ll be able to project how much of your goal will be funded when college begins. This will help you see how much will need to be funded out of pocket. This information will also help your child understand any budget constraints as they are selecting colleges.

While applications are submitted during their Senior year, the most important groundwork is laid during their Junior year. This is the year most experts recommend making a list of colleges, visiting campuses, and planning ACT/SAT testing.

Planning can even start as early as their Sophomore year, as students can explore career and major options before narrowing down a college list during their Junior year. Don’t overlook the importance for your child to choose both the right college and the right major. A lot of money can be saved by avoiding transferring or changing majors, both of which can mean more time in college and more costs. There are testing firms that can help them analyze their career aptitudes and preferences.

Regardless of where you are in the college planning timeline, we are here to help. Please email or call if you want to set up a meeting or talk by phone.

Mary McCraw, CFP^®

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