Saving for College Adds Up
Starting early and contributing regularly can help you prepare for future costs.
f you're hoping to assist your child with paying for college, getting an early start on your savings can make a significant difference. And putting that money in a tax-deferred account, such as a 529 college savings plan, may increase the growth potential of your assets.
- Even small contributions can have a significant impact on your savings goal, especially if they're made early.
- The longer you allow compounding to work, the more your total balance may be derived from potential earnings rather than contributions.
- The more you save, the less you'll have to borrow to pay for college—even if you think you'll qualify for financial aid, a large portion generally comes in the form of loans.
Establishing an automatic savings strategy can help ensure that you make contributions even when your goal is in the distant future. After all, your initial contributions have greater potential to generate the most return, thanks to the effects of compounding.
Please note that a 529 plan's disclosure document includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. State tax benefits are generally only available to residents of that state. Earnings on a distribution not used for qualified expenses may be subject to income taxes and a 10% federal penalty. The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distributions, or other factors, as applicable.