It may be a dream of yours to be able to start paying for your child’s education. As you know, and education is already expensive, so imagine when your child gets to that age to choose a major and you had it set in your mind that you wanted to pay for it all!
Nick Schneider is back for this episode of The Doctor’s Life Podcast to let us know how to start saving now so when it comes to paying for your child’s education, we are prepared and can pull it off. All episodes of The Doctor’s Life Podcast are available on iTunes, Android, and on SoundCloud. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast.
How to set up your child’s education
- The most important thing to consider before you start funding your children’s education is you yourself. I liken it to the oxygen masks used in case of an emergency on an airplane. You cannot take care of your child unless you are prepared yourself.
- Once you have built a foundation for your own savings strategy, you can then turn your focus on the next generation. Here are a couple of facts to consider before you start planning.
- The cost of education today ranges from 30k annually for all expenses in an Public university and 50k for Private. This is a 200k asset you are trying to create in today’s dollars.
- The biggest concern is what will that look like in 15 years? The average inflation assumptions used to calculate education costs is 6-7%
- This means that your child’s education will cost roughly 450K
- What tools are out there to ease this burden?
- The most popular tool used is a 529 plan.
- This tool allows you to save money tax defered and withdraw tax free for qualifying educational costs.
- It will take roughly $600-1200 a month to make this level of education happen
Roth IRA
- Most people do not realize that a Roth IRA can also be used as a secondary educational account.
- Waived fees and taxes if used for higher education
- Limited to 5500 annual contribution
UTMA
- An irrevocable gift to your child
- Any permitted under state laws. Most common are stocks and bonds
- Largest negative is that the child can use for whatever they want. You lose control
Need help with something else?
Get Your Free Disability Insurance Quote! It’s easy!
Go to the previous podcast episode.
Subscribe to our email newsletter for expert tips about finances, insurance, employment contracts, and more!
