Hit the Books: Keep Your Job and Make More
Recently, it seems like there have been a lot of articles debating if college is worth the investment. If the debate has given you pause when deciding how to save for college, consider the following facts:
Higher education is often associated with higher income, but did you know it's also associated with lower unemployment? Data from the U.S. Bureau of Labor Statistics shows that workers with higher levels of education are likely to enjoy both higher incomes and a lower unemployment.
With a little planning, it's possible to pursue the benefits of higher education without breaking the bank. Putting aside money for college consistently and early helps gives you the best chance to reduce the impact of borrowing on future goals.
Relying Solely on Loans May Hinder Future Goals
Previous generations have funded higher education by taking out student loans. However, as tuition increases, student loan balances are increasing too. The amount of debt graduates accumulate can play a significant role in how soon they are able to pursue major life goals.
By saving for college early, students may be able to borrow less for their degrees. After graduation, this can help free up income for other life goals, such as buying a new home or saving for retirement.
To get started, use our College Planner calculator to project how much you may need to save to cover college costs.
Start Early: Take Advantage of Time in the Market
The more time you have for your investments to grow and compound, the more likely you are to reach your goals.
Compounding occurs when you earn money on your original investment and on any earnings for that original investment. Over time, compounding can have a powerful effect.
The chart to the right shows what a difference five years of investing for college can make.1
If you're getting a late start, focus on the time you have left by developing a plan. Having some college savings is still better than borrowing the full amount, helping to offset the impact of student loan debt on life after college.
Get to Know Your Options
Compare the benefits of different college savings investment options to choose the one that's right for you.
1The hypothetical calculation above assumes an initial investment of $2,500 and additional monthly contributions of $250 earning a rate of 6% annually over 13 and 18 years respectively. It additionally assumes reinvestment of all realized gains, dividends, and interest receipts and does not account for the effects of any added fees, expenses, or taxes that might be incurred. If all taxes, fees, and expenses were reflected in the calculation, reported portfolio values would be lower.
Source: American Century Investments, Time Value Calculator. ©2016 Standard & Poor’s.