With the rising costs of attending college, much debate has occurred in recent years about the value of a college education. Yet, a recent examination by the Federal Reserve Bank of New York found that over the past decade, the rate of return on a college degree has remained fairly consistent at around 15 percent.* This rate of return is the difference between wages for individuals who have a college degree versus those with only a high school diploma after accounting for the cost of college. This return rate remained steady for both bachelor’s and associate degrees. The report found that despite changes in the economy, a college education continues to be a valuable asset in creating higher lifelong earnings. So how do you ensure your child is able to afford college once he or she is ready?
College Saving Strategies
While the advantage of a college degree is clear, the price of college continues to increase year-after-year, creating a challenge for many families. But, there are a number of ways, both traditional and creative, that you can use to help your child be financially prepared for college:
Open a college savings account for your child. Navigator Credit Union offers a variety of savings vehicles including Coverdell Education Savings Accounts (ESAs) and 529 College Savings Plans. Both of these savings accounts are a great way to invest long-term in your child’s education. These tax-advantaged accounts allow anyone to contribute including parents, grandparents, other relatives or family friends. Which brings us
to our next tip:
Suggest relatives contribute. Many people, including grandparents and other relatives, want to see your child succeed. Consider asking them to contribute to your child’s savings in lieu of extravagant gifts during the holidays or for birthdays. While of course your child will enjoy some presents, think about giving smaller gifts and putting the difference into saving for their future.
Continue “paying” expenses you’re used to. As your child grows, there will be a number of expenses that arise and eventually are no longer needed — such as money for diapers, baby-sitting or braces. Instead of forgetting about these costs once your child outgrows them, start putting that money toward your child’s college savings.
Here For You and Your Child’s Future
Getting started on saving for your child’s educational future doesn’t have to be confusing or difficult. The investment professionals at Navigator Credit Union can help you decide the right strategy for your family. Contact us today by calling (228) 474-3427 or visiting us online at https://navigatorcu.org to help your child prepare for the rewards of a college degree.
* Source: Federal Reserve Bank of New York. www.newyorkfed.org.
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