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Saving for College. Expert advice for panic-free saving.

Experts: Rebecca Mathias, the founder of Future Trust and Adam Bash, the director

1. Starting Too Late

People have a tendency to put off things that are way ahead in the future and think, “I’ll worry about that later.” The biggest mistake parents make is not setting up a college savings account early, right when a child is born. If you do that you have the power of time on your hands. Setting up the smallest savings account and supplementing that with the Mastercard rebate is good thinking. If you are going to be spending money on your child, you might as well scarf off a one-to-ten-percent of that and stick it in the college savings. Also a part of this mistake is not setting up a 529 account. Because what 529 accomplishes for people is to multiply your savings. Because you don’t pay taxes on the interest that you earn or if you’ve invested in stocks, bonds, whatever, you don’t pay any interest for that so it just compounds. It leverages your savings in a tax-free manner and is no cost to you. We want people to start thinking about it right when the baby is being born. If you don’t, what unfortunately happens is your child will come out of college with a lot of debt that they have to repay.

2. Counting on Financial Aid

The second mistake is that people think they can do it with loans or with financial aid, but that often isn’t true. If you are fortunate enough to get financial aid, it is usually not for all of the cost associated with college. You would definitely have to supplement even if you are able to get some financial aid. A lot of those financial aid plans are in the form of loans so you’ve got to pay it back, and you’re going to pay interest too.

3. Getting Discouraged

Parents get pretty discouraged, because one of the things that the industry has done is you see a lot of advertisements, you see a lot of articles saying that in 2015 the cost of a four year private institution is $200-some-odd thousand dollars, and the family gets discouraged feeling that they can never achieve that. Don’t get discouraged, just set up a program and stay with it. Save consistently and start early. Set up a program that you can stay with. It can be $5 a month, plus the Future Trust rebates. It can be $50 if you can afford that. As you increase your salary and can afford to increase what you save, you can gradually increase this. But be consistent. Every month put something into the college savings plan. The biggest thing is to stay positive.

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