As a rising junior in high school, college has been on my mind non-stop. I spent my summer attending college programs, planning when to start SAT prep courses, doing my summer reading for my upcoming AP English class, and interning for Context Wealth. With college so close on the horizon, it seemed fitting for my time at Context Wealth to be focused on projects related to college saving and planning. During these projects, one thing became abundantly clear: college is EXPENSIVE. While college being costly is not new information to anyone, my internship this summer opened my eyes to the challenges of planning and saving for college.

College Savings Goals

The first step in creating a college savings plan is establishing your goals. What colleges are reasonable for your child? Do you want to pay for college entirely, or do you want your child to pay part of it themselves? Are you comfortable with having your child leave college in debt? How might debt affect the plan you have for your child’s future? I learned that everyone has different priorities when creating a college plan, and it is essential to develop a plan that reflects your family’s goals and values.

College Savings Planning

After establishing your goals, the next step is to create a plan to meet them. A common tool used in college savings is a 529 account. A 529 account is a college savings account that allows allocated money to grow tax-free. The savings can be used for four-year or two-year schools, trade schools, graduate schools, and certain international schools. The funds can also be used for specific apprenticeships, room and board costs, and related costs such as books and computers. If this recourse sounds helpful for your family, I recommend exploring the specifics further here.

My project this summer consisted of making reports for clients with children to help them understand what percentage of college their current 529 balance will cover. This project taught me how clients utilize 529 accounts differently to meet their specific needs. Saving money each month to invest in the account is one common tactic. Reducing costs and consistently investing sums into your 529 account each month is a great way to increase your investment. Another option is to invest money yearly to make up for the shortfall of assets you need to meet your goal. A great aspect of 529 accounts is their high contribution limit, allowing you to invest up to $170,000 in one lump sum. 529s are very customizable investment plans, allowing each family to meet their goals in ways that suit them best. 

It is important to note that any investments placed in a 529 account remain in the parent's control, so the money can be removed at whatever time and used for whatever purchase the parents desire. However, the gains will be taxed if you withdraw money from a 529 account for non-educational purposes. 529 accounts act as a great deterrent to avoid temptation and keep specified amounts of money set aside for college.  

Another consideration in college planning is not relying too heavily on financial aid and scholarships, which can be unpredictable and challenging to obtain. A common misconception is the accessibility of financial aid. Need-based financial aid is often unavailable to families that make above $100,000 annually, and merit-based financial aid can be difficult to access.  Considering how inflation might affect your investment as college costs rise yearly is also important. In the past several years, we have seen inflation rise and affect family budgeting, so incorporating expected inflation into budgeting plans is vital.

Take Aways

With college applications and preparations being such a stressful ordeal (trust me, I know from experience), the last thing you or your child wants to worry about is how you will manage to pay for it last minute. My most significant takeaway from my summer internship is that the biggest resource in college savings is time. While the time between your child’s birth and high school graduation initially seems lengthy, any parent that has done it before will attest that the time flies. Once the time has passed, you can never get it back, so starting early is incredibly important. 529 accounts can be opened before a child is even born with as little as $25 and 15 minutes of your time. Thanks to compound earnings and tax-free growth, invested money will grow exponentially, benefiting those that invest early. Although it’s never too late to start, it’s never too early either.  

- Siena Duke
July 27, 2023