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At Extreme Investor Network, we understand the importance of financial planning, especially when it comes to saving for higher education. With the rising cost of college and uncertainties surrounding federal student loan forgiveness, more and more Americans are prioritizing saving for their children’s future education. In fact, according to Fidelity’s College Savings Indicator, 74% of parents surveyed in 2024 have started putting money away for college, a significant increase from 58% in 2007.
Take Kathryn Bracho, for example. At 48 years old, Kathryn, along with her husband Michael and their two sons, Declan and Taran, decided to start contributing to college savings accounts in 2017. The increasing cost of college was a wake-up call for them, prompting them to take action to provide their sons with options after high school.
But saving for college can be a daunting task, especially when faced with sky-high tuition costs and the specter of student loan debt. David Ochs, a physician in Richmond, Virginia, had accumulated $315,000 in education loans by the time he finished his residency. Determined not to let his sons experience the same hardship, David started saving for their college educations soon after they were born. Sacrifices, such as forgoing extra payments towards his own student loans, were necessary, but David saw it as a gesture of love towards his children.
How savings plays into covering college costs
Among the 94% of parents funding their children’s higher education, nearly half consider savings as their primary way of paying for college, according to a report by the College Savings Foundation. This shift towards prioritizing savings has led to an increase in investments in 529 college savings plans, with total investments reaching $450.5 billion in June 2024.
However, despite the benefits of 529 plans, many parents struggle to meet their savings goals. While 67% hope to use savings to cover their child’s education, only 30% are on track to achieve that goal. It’s clear that proper financial planning is essential to ensuring a secure future for your children.
The benefits of a 529 college savings plan
Recent changes to 529 plans, including higher contribution limits and flexibility in rollover rules, have made them an even more attractive option for families. With new Roth IRA rollover rules allowing for tax-free transfers of unused 529 plan funds and higher maximum contribution limits, families have more options when it comes to saving for college.
Additionally, a simplified Free Application for Federal Student Aid has created a “loophole” for grandparents who own 529 accounts for their grandchildren, allowing them to save for college without impacting financial aid eligibility. Tax deductions or credits for contributions to 529 plans further incentivize families to save for their children’s education.
At Extreme Investor Network, we’re committed to providing you with the latest insights and tips on personal finance. Stay tuned for more valuable information to help you achieve your financial goals and secure a brighter future for you and your family.