Tuesday, February 24, 2009

The Cost of Delay: Don't Put Off The College Savings Plan

Late-grade penalty flashback: I recently registered my children in a state-run prepaid college savings plan. And I am feeling the sting of delay and regret. There's a financial penalty for procrastination.

The delayed savings penalty feels like a tardy-grade penalty. As a student, I was docked points when I turned in late term papers. For example, an essay that might have earned a 95 (a solid A) would have been knocked down to an 85 (a humble B) because of tardiness. Ouch.

That's how I feel about the recent enrollment in the college plan for my three kids. Here are the approximate numbers for a plan that involves pre-paid tuition for two years of community college, followed by two years of a state university or college:

  • Child #1 (age 16): Monthly fee: about $600
  • Child #2 (age 14): Monthly fee: about $240
  • Child #3 (age 11): Monthly fee: about $120

As the numbers indicate, the monthly college savings bite is much smaller when you start earlier. A monthly college savings bill of $120 translates into only $30 a week and can slip under the financial radar with minimal pain. But $600 is harder to swallow and difficult to digest each month!

For the same plan , a parent registering a newborn would pay about $82 a month or roughly $20 a week. Of course, I am grateful that my children are now enrolled in a pre-paid tuition plan, and I am grateful for the financial assistance my parents will provide. But if you have school-age children, I urge you to start saving early.

Mimi Whitefield, a Miami Herald writer, recently wrote an excellent story about financing education: A mom offers practical tips on paying for college

Here's another article from College Board: 529 Prepaid College Tuition Plans Freeze Costs at Today's Rates

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1 comment:

Grant Baldwin said...

Ah the power of compound interest! In my work with teenagers, I always try to teach them that if they start now saving/investing, they will always have a huge advantage over people who start later in life.