Terrified about sending your children to college? You should be. The cost of education has skyrocketed. This not only affects the middle class, but even affluent families struggle.
You must start as soon as possible saving. The earlier you get started the better you will be.
There are other things you can do that can be beneficial. Put together a strategy that keeps you from putting yourself into long term debt and damaging your retirement planning.
- Have open and honest discussions with your children on what you can afford.
- Have a similar conversation with your spouse so you are both on the same page.
You can also look into 529 plans to save for college. You can put after tax money into it tax deferred. It grows tax deferred and if the money used is for education, even the gains are tax free. You can open one for each child and if for some reason a child decides not to go to college, you can transfer the money into another child’s account. You can also use it for yourself to further your own education. If neither of these are appropriate – you pay a 10% penalty assessed against the earnings portion and taxes on the gain.
Listen to this discussion
A listener asked RKF Financial’s opinion on the following strategy: Cash out refinance on home and then use the money to invest in a 529 plan for his 5 year old son. Interest rates are low and can lock in for 30 years.
Listen to Bob’s opinion