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Trevor's Weekly Market Reviews

Trevor's Weekly Market Reviews

| December 08, 2020

The cost of college has skyrocketed as Notable Number three in this week’s Weekly Market Review details.  This statistic hit home for me as I graduated from college in 2001.  The fact that 1 year of college today cost what 4 years of college cost just 20 years ago is very surprising.  Speculating about what college will cost 10 or 20 years from now is a scary proposition. 

How to pay for college has become a bigger and more pressing question and financial planning challenge.  I often find that many folks are stuck in the middle, not wealthy enough to really afford to pay for their children’s college education without it being a huge financial burden, but above the financial thresholds to qualify for meaningful financial assistance. 

My advice, make a plan even before your children start school and take advantage of tools such as 529 accounts that provide tax advantages.  This approach benefits from compound interest and spreads the cost of college out over many years.  In a perfect world, when the child is born, someone can write a sizeable check to an investment account, such as a 529, and then the time value of money can take over.  Eighteen to twenty quick years later, amazingly, you have enough to pay for college or at least of lot of it.  In the real world, this is seldom the case and it wasn’t a feasible option for my three children.

In our case, we did start each of our three children a 529 account soon after they were born and have a monthly automatic draft occurring from our checking account to each.  The amount of money we contribute each month is modest, but starting early, along with some good investment markets, has allowed our children’s accounts to already have meaningful values.

In the end, there are many ways to pay for college including scholarships, grants, work-study programs and loans.  As important as college planning is, I sometimes see people prioritize it even above their own retirement planning.  I believe this is a mistake.  While there are lots of options for paying for college, when it comes to being prepared for a financially comfortable retirement, you either have the money or you don’t. 

If you are not sure that you are on track for a financially successfully retirement and/or need to try to make progress towards college funding, give us a call.  We can help.  

As always, we hope your find the Weekly Market Review both informative and interesting.  Have a good week.

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Trevor N. Coe, CFP®