SPRINGFIELD, Mass., Aug. 16, 2017 /PRNewswire/ -- It's no secret that the earlier you start saving for college, the better off you'll be. But just how early should you start?
According to a recent MassMutual College Planning and Savings Study, parents who started saving at birth or before their child's first birthday have saved an average of about 25 percent more than those who started saving when their child was between ages 1 and 10 and about 40 percent more than those who started after age 10.
The real boost seems to come if parents start saving right away, but saving for college is no easy task, especially for new parents who are juggling new financial priorities like childcare costs.
MassMutual's college savings calculator estimates that a family with a 5-year old child entering kindergarten today can expect to pay a hefty amount when their child enters college in 2030, with averages for these youngsters looking like:
- Private 4-year college: $368,739
- Public 4-year out-of-state college: $287,466
- Public 4-year in-state college: $163,279
- Public 2-year college: $44,763
For those who haven't started saving, age 5 is an interesting tipping point because that's when many parents can stop paying for full-time childcare expenses. By putting a percentage of the money freed up from childcare expenses towards saving for college, parents can save more without having to change their current spending habits.
For example, a family who takes $200 each week spent on childcare and saves it from when their child starts kindergarten through high school graduation, more than $135,000 will be saved for college (assuming a conservative average 1.5% interest rate over the time period).
Here are 5 tips to help families plan and save for college:
1. Start early. Start saving what you can at birth, and for those with child care expenses, increase at age 5 by putting the money you freed up towards saving for college.
2. Make it automatic. Consider automating checking account or payroll deductions to interest-earning savings accounts specifically designed for higher education, such as a 529 savings plan.
3. Encourage monetary gifts (including 529 plan gift cards) from family members and friends for college savings plans for gift-giving events.
4. Know how much you need to save. Determine how much you need to save using free online tools such as MassMutual's college savings calculator.
5. Protect your loved ones for unexpected events. Life and disability income insurance are solid considerations for parents with children.
MassMutual is a leading mutual life insurance company that that is run for the benefit of its members and participating policyowners. MassMutual offers a wide range of financial products and services, including life insurance, disability income insurance, long term care insurance, annuities, retirement plans and other employee benefits. For more information, visit www.massmutual.com.
CONTACT: Paula Tremblay, 1-413-744-0885, [email protected]