According to the College Board, the average cost of tuition and fees for the 2015–2016 school year was $32,405 at private colleges, $9,410 for state residents at public colleges, and $23,893 for out-of-state residents attending public universities. Should your child or favorite niece get an acceptance letter from Yale or another elite school, that price tag soars significantly. If you’re planning on supporting a young person’s college education, is your sacrifice worth this hefty price? The short answer is: absolutely.

A college degree is more than a piece of paper, it’s an important building block for most professional careers. A recent piece on CNNMoney cited a 2016 report that reinforces the growing importance of a college education in securing a job. Of the 11.6 million jobs created after the Great Recession, 8.4 million went to those with at least a bachelor’s degree, according to the Center on Education and the Workforce at Georgetown University. Another 3 million went to those with associate’s degrees or some college education.

Higher education provides ample payback, even when you factor in student loan obligations. According to the Bureau of Labor Statistics, Bachelor’s degree holders earn nearly $1 million more over a lifetime than high school graduates. Those with doctorate degrees earn nearly $2 million more. When you help someone pay for college or grad school, you’re giving much more than money – you’re creating a pathway to a lifetime of success.

Of course, that road has some hefty tolls. So unless you’ve hit all the numbers in the Connecticut lottery or are fortunate to have an existing portfolio of assets already set aside, most parents, guardians and benefactors need to start planning for subsidizing a child’s education as early as possible. Here are three critical considerations:

  1. Don’t underestimate cost. Your financial planner can help you forecast the actual cost of tuition pegged to an enrollment date. Tuition costs continue to rise, so budgeting at current cost levels will leave your education fund well below what’s really needed when it comes time to choose a college.
  2. Choose the right savings and investment options. Selecting the right mix of financial products to fund a future education is complicated because there are dozens of options. Different vehicles, such as 529 college savings plan or custodial accounts, have very different tax implications. Each path also has its own unique impact on future financial aid. You’ll want to meet with your financial advisor and evaluate every available option.
  3. Start early, stay diversified. Diversification over the long term isn’t just important for your personal portfolio, it’s critical for meeting educational fund goals. Saving and investing over an 18-year span will always be your best and most efficient bet, so get on board early. Like all your assets, your child’s college savings fund should benefit from a constantly refined approach that protects and grows the investment.

The gift of an education goes well beyond graduation day. With the right advance plan, funding that gift can be less complicated and yield more return than you might think.

 

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