Parents of preschoolers should start saving for college now
Parents of very young children often have their sights set on preschool, not college. But South Carolina’s State Treasurer wants to change that.
“Saving for college is so important, but it’s not urgent unless you put it off,” Curtis Loftis said.
Parents may think they have plenty of time to save – or even that their child won’t attend college – but as the years pass, what would have been a small amount set aside here and there can become an overwhelming debt.
South Carolina has an easy fix to the problem: the Future Scholar program. Available at https://www.futurescholar.com, is a 529 Savings Plan that is administered by the Treasurer’s Office.
“Anybody can do this, whether you are 35 with your first kid or 70 and planning for your grandchildren,” Loftis said. “It is a fast, easy way to save for college.”
Tax time may be the perfect time to consider opening an account, Loftis said.
“A lot of people receive a tax refund,” he said. “The average refund is $3,000. Can you imagine the difference if you put the $3,000 in your grandchild’s account each year? It’s easy to spend $3,000. If you have the ability to invest, make a game out of it and put it in these accounts.”
Some families ask grandparents and other family members to give to a child’s Future Scholar account instead of buying expensive gifts at birthdays and other occasions. Parents can even send an email invitation to let friends and family know about the plan and allow them to give online.
“It tells them in advance,” Loftis said. “It brings the group of people you care about and who care about you into this enterprise. We want our kids to do better than we did. America is a rich country. Your friends will help you. You just have to let them know.”
Small contributions can quickly add up.
“If you can put $20 or $50 a month, we understand that,” Loftis said. “Very few people start a Future Scholar account saying, ‘I want to fund 100 percent of my child’s college.’ Over time, it grows into a larger amount.”
The program can also have generous tax benefits. Those saving in Future Scholar have front-end tax savings and more.
“Once in the account, it stays in tax free,” Loftis said. “As long as you take it out for educational expenses, it’s tax free there as well.”
The way in which the program is set up means parents need not be financial experts to make it work to their child’s advantage.
“The direct plan is what many people know as age-based,” Loftis said. “We’ve done the hard work for you. We’ve looked at the volatility over 18 years. If your child is 12, you have a less time and it will be more conservative. Not everybody is an institutional investor. This takes the guess work out.”
Loftis said college graduates are now finishing school with an average of $30,000 of debt. That can increase to $70,000 – $100,000 for an advanced degree. This program is designed to allow parents to invest slowly and easily and give their child options once he or she reaches college age.
“It’s so flexible,” Loftis said. “You could literally be in the program today. You can use the money at any accredited college in the country. You can do one on yourself. There are so many options. The flexibility of the plan is just remarkable.”
But what if a family opens a plan for one child, and scholarships cover his college costs? That’s an easy fix, too.
“All of sudden, he gets a scholarship and doesn’t need the money,” Loftis said. “You can transfer it to the other one with no penalty.”
The Future Scholar program is not subsidized by taxpayers and there is no minimum investment requirement.
Loftis said parents of young children have no way of knowing what the future holds, but they can plan for their children’s education.
“The one thing you can control is a college 529,” he said.
Learn about setting up an account, tax implications and more at https://www.futurescholar.com
IRS questions and answers about 529 Savings Plans: https://www.irs.gov/uac/529-plans-questions-and-answers