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Child’s Education
Keeping ahead of escalating college tuition
The future always presents opportunities, as well as a degree of uncertainty.
As young parents, one of those uncertainties is the cost to educate our
children. We can look at present-value, apply an inflationary factor and make
certain assumptions about the supply and demand of a continued education, but
in the end, there is no fixed formula that will let us know what it will cost
to educate our kids.
Even though little Johnny or Suzie may be excelling in the third-grade science
fair or on the Little League field, one should not assume that a scholarship or
grant will lessen the burden of college tuition. You must have a plan - one
that is realistic, attainable and is built around certain “worst-case”
scenarios.
Here’s an example:
Let’s say the average four-year tuition today is $80,000. Let’s assume that you
have 13 years until the first tuition bill is payable. Sounds like a lot of
time, right? Wrong. Let’s assume that college costs will increase by a factor
of just 3% per year, on average. That means the same $80,000 tuition is going
to cost $117,482 by the time your child is ready to go to school. Thirteen
years is a mere 156 months. So - starting TODAY, you would need to save $753
per month to cover those costs. Sounds steep, right? For most Americans, it is.
But help is on the way.
Why not let the stock market help you? Let’s assume (as it has been for the past
100 years or so), that the US stock market rate of return will average 8% per
year. Granted, there are years that are better than that, but there are
certainly years that are worse, so let’s use 8% as a good average over the next
13 years. If you invested in ETFs or a well-diversified portfolio, and
compounded your investment at 8% per year, you could achieve the same goals
that $753 per month would have generated - for a much lower savings of just
$430 per month. A simple 8% rate of return (albeit - never guaranteed) could
reduce your necessary monthly budgeted allotment by $323 (or 43%). That is
a savings of over $67,000 on the same $117,000 education costs
(excludes MSF fees and long-term capital gains tax). See your financial advisor
for more details.
A word of caution!
But - just remember. Every month you delay, every month you “procrastinate,” the
monthly budget needs to increase accordingly. With an at MyStockFund, you can
start this process immediately and set your AutoVest Schedule for $430 per
month to be automatically deducted from your checking or savings account on a
monthly basis. Tell us which securities you would like to invest in, and we’ll
do the rest. It is simple, easy, affordable - and CRITICAL to your child’s
education. Stop worrying - start doing. MyStockFund, and the stock market, can
help!
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