Open an accountThe best time to start saving for college is right now. Start by choosing the best type of account to hold your college savings. For many investors, a 529 college savings plan provides the best mix of benefits—such as tax breaks, high contribution limits, and flexibility—to help you save. After you’ve chosen an account, you can select your investments. Choose your investments based on your risk tolerance (how you feel about market fluctuations) and how much time you have to save.
Many 529 investors choose an age-based option, which is a complete portfolio that automatically adjusts over time so your investments become more conservative as your child gets closer to college. Age-based options make it easy to maintain a balanced portfolio with minimal effort.
Families who have a plan to pay for college save 46% more than families without a plan, according to Sallie Mae’s “How America Saves for College 2015” study (conducted by Ipsos Public Affairs).
Create a savings goal
A plan can be as simple as identifying the total amount you want to save. Keep in mind that you may not be able to save enough to cover 100% of your child’s college expenses—in fact, most people don’t. The Sallie Mae/Ipsos study reports that families (parents and students) typically cover about 43% of total college costs through income and savings (529 college savings accounts and bank accounts).
Once you’ve decided on the percentage of expenses you can realistically cover, use Vanguard’s college savings planner—which factors in your child’s age, the type of school he or he might attend, and the amount you’ve already saved—to figure out how much you’ll need to save each month or year. (And remember that saving for college can be a family affair—relatives, friends, and even your future grad can contribute.)
Make regular contributions
Ready to save?
For more information about any 529 college savings plan, contact the plan provider to obtain a Program Description, which includes investment objectives, risks, charges, expenses, and other information; read and consider it carefully before investing. If you are not a taxpayer of the state offering the plan, consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Vanguard Marketing Corporation serves as distributor and underwriter for some 529 plans.
All investing is subject to risk, including the possible loss of the money you invest.