Saving for CollegeBy Carol Ringrose Alexander, CFP®, AIF®, CDFA™

Carol Ringrose Alexander

Carol Ringrose Alexander is a financial advisor with Retirement Investment Advisors, which has been recognized as one of the top fee-only investment advisory firms in the nation more than a dozen times in national publications.

one of the most valuable things you can give a child is an education. But with the cost of a college education increasing on average six percent per year, it takes planning to achieve that goal.

It is important to start saving as soon as possible. Even a relatively modest weekly or monthly investment can grow to a significant college fund by the time a child matriculates. Even if your child is attending college now or will be in a year or two, you can still utilize a college savings plan. It is less expensive to save for college than to borrow. There are about a dozen different college savings vehicles available and choosing among the many options can be confusing. If you want to do your own research, there is a lot of information at www.savingforcollege.com. If you don’t have time to do a lot of research, open a section 529 college savings plan for each of your children. Section 529 plans are one of the best vehicles because of the tax advantages, the low impact on need-based financial aid, the flexibility, the high contribution limits and the lack of income phase-outs, and because control over the account remains with the parent. The Oklahoma College Savings Plan is the only plan that provides a state tax de-duction for Oklahoma residents. There is an Oklahoma tax deduction for 529 plan contributions of up to $10,000 per taxpayer per year, and there is a five-year carry forward provision for up to $60,000 for an individual or $120,000 for a couple. If you have contributed to a 529 plan other than the Oklahoma plan and roll over those funds to the Oklahoma 529 plan, this qualifies for the Oklahoma tax deduction. For more information about the plan or to use the online calculator to estimate how much you will need to save, go to www.ok4saving.org or call 877.654.7284. Most advisors agree that providing for your own retirement is more important than saving for college, since no one offers scholarships or loans to support you in retirement. Ideally, college and retirement should be part of the same financial plan, but you should expect some trade-offs as you balance these goals. You may have to work longer than you would like, or your children may have to borrow more money than they would like. The important thing is that it is possible to meet these two major financial responsibilities. Your child’s college tuition could be one of the largest expenditures you ever make. The tuition component of the Consumer Price Index (CPI) has increased on average by eight percent per year from 1979 to 2001, according to the Bureau of Labor Statistics. If this continues, children born today will face college costs that are three to four times current prices by the time they matriculate. But with the proper planning and saving, you can put the cost of any college within your reach.

This article appeared in the March 2009 issue of Edmond Monthly. It is reproduced here with permission. © 2009 Southwestern Publishing