Start Your 529 Plan Today to Reach Your College Savings Goals
Aug 8, 2012
Starting your 529 college savings plan early is crucial to having the necessary money to fund college tuition. Just waiting a few years to begin can really destry all the potential a long time frame can give you.
The sooner you start, the sooner you can take advantage of the compounding effect of time on your investment. Contributing the same dollar amount to your account regularly can be an effective investment strategy and may also help you lower the average cost of your investment. Of course, no method of investing can prevent market risk. Investment return and principal value will fluctuate so that when withdrawn, your investment may be worth more or less than the original amount invested.
In the chart below we have an example of 12 contributions per year with an annual rate of return of 6%. To reach a savings goal of $100,000 requires contributions of $256 a month if you start when your child is a newborn. Waiting 8 years to start saving means you will need to contribute $607 a month to reach the same savings goal.
As you can see starting 8 years after the child is born, you would of missed many years of savings and growth resulting in an account with $17,544 less than it could of been. Time is on your side when saving for a future goal.