While college education is expensive, there are strategies you can use to help prepare for these impending costs.
When saving for college, starting early can make a significant impact on savings. The chart below shows two new parents who want to save for college – Liz (the teal line) and John (the yellow line.) While Liz starts investing today, John procrastinates for 5 years. In this example, John ends up with 40% less money than Liz when his child is ready to start college. Starting early can make a difference.
Put Time on Your Side
Assumes an Annual Rate of Return of 7%
This is a hypothetical illustration to represent the effects of compounding assuming an annual rate of return of 7%. It does not reflect an actual investment, investment expenses, or any taxes payable upon withdrawal which would lower the amounts shown. Returns are not guaranteed and may be less than or greater than the amounts illustrated.
Invest Regularly
Making regular investments, even if they are small, can greatly increase how much money you have saved when it’s time for college. The chart below shows the difference between investing once when a child is born and investing $100 monthly over 18 years. In this example, investing regularly results in over $42,000 more in the same time period.
NJBEST’s reoccurring contributions make it easy to invest regularly. Conveniently set up online.
Small and Consistent Investments Can Make a Difference
This is a hypothetical illustration to represent the effects of compounding assuming an annual rate of return of 7%. It does not reflect an actual investment or investment expenses, which would lower the amounts shown. Returns are not guaranteed and may be less than or greater than the amounts illustrated. A periodic investment plan such as dollar-cost averaging does not ensure a profit or protect against a loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels; investors should carefully consider their financial ability to continue their purchases through periods of fluctuating price levels.
Ask Friends and Family
It takes a village. Ugift® is an easy, free-to-use service that lets 529 plan account owners encourage family and friends to celebrate children's milestones with the gift of education savings.1
