There is a lot of
mis-inoformation floating around the financial community about funding
college education. It is a challenge for most parents who have college
bound kids to know what to do and how to plan for this major expense.
It usually comes along about the time that people are also dealing with
aging parents and other sensitive matters and this creates a few
problems. What people do not realize is that when you pay for college
education, it creates a huge loss of wealth now and in the future. Let
me explain.
Let?s say that I am 45 when the kids go off to
college. If I had built up a college account to $100,000 and used it
for education costs, what have I given up? First of all the $100,000
that was spent for college is no longer in my pocket. I will not have
it when I retire and if it could have grown at 10% per year, it would
be worth $672,749 when I retire. That means that I have given up a
potential retirement income from that source of $67,000 per year for
the rest fo my life. If I didn?t need that income throughout
retirement, it would have been worth $4,525,925 when I reached age 85.
Think about that, what is the cost of college education? It is huge.
You
need to remember that there are economic factors at play in our lives
that affect every monetary decision that we make. You need to plan your
college education, and for that matter your whole life, on a
macro-economic basis. You should avoid locking your money up for only
one purpose (ie. 529 plans).
There are smart ways to plan for
college and not-so-smart ways to plan. Understand them and train
yourself to look at things from a macro-economic point of view and you
will be much ebtter off long term.
