When considering starting a family the thought of calculating how much diapers, food, and the cost of college, will be can be very frightening. However, if you plan ahead, over time these future expenses won’t look so threatening. Taking college education cost for example, according to College Data, “the average annual cost of attendance at an in-state public and private college averaged respectively $22,826 and $44,750.” If you decide to wait until the last minute to pay for your child’s education it will probably hurt you wallet more, but now you have options to start saving as early as today. Below you will find answers to some frequently asked questions when it comes to saving for your child’s education.
When should I start saving for my child’s education?
You can begin to save for your child’s education before they are born, in a savings account. As soon as they are born and have a social security number you can start a Florida 529 savings plan account. Another option is to purchase a prepaid plan before they have even received a Social Security Number.
What is the cost of waiting?
The longer you wait the more intimidating the amount of money require to reach your college savings goal will look. $44,750 a year is a more daunting number then say, $100 a month for 18 years.
(Estimated potential account value based on a $2,500 initial investment and 5% interest earned, *with no fees applied, for different monthly contribution amounts and investment terms)
Click here to read more about the cost of waiting to save for your child’s college plan.
How much should I save for my child’s education?
There are different programs that allow you to pay one year at a time. You can start contributing money to cover your child’s first year expenses, then work up to the second year, until eventually you’ve paid their whole college education. The more you save, the more your child benefits. The key is as soon as you decide you’re going to begin saving for their college, make a plan and take action!
What are my options for saving?
The most common forms are the 529 Savings plan, the 529 Pre-paid plan and Education Savings Plans (ESA).
What is the difference between my option saving for saving for my child’s education?
They are all tax free if used for qualified education expenses.
- The Savings & ESA have maximums on contributions.
- The 529 Savings is an account that you contribute to, invest and watch it grow over time. It can be used at any accredited university nationwide.
- The 529 pre-paid pays for x amount of credit hours (regardless of the price) at Florida schools. There are different combinations you can purchase. Ex: 2 yrs college + 2 yrs University; 4 years University; there is now a new 1 year at a time program.
- ESA – $2000/yr limit per beneficiary- can be used for secondary and higher education.
Click here for more information on different options for saving for my child’s education.
When can I enroll?
529 Pre-paid: October 15, 2014- February 28, 2015
529 Savings and ESA: Anytime
When am I required to make my first payment for pre-paid?
First payment is due April 20, 2015
What if my child doesn’t go to college or gets a scholarship?
In a Florida pre-paid, you would get today’s value of the account balance returned if your child receives scholarships. If he/she decides not to go to college, you will receive the amount you invested.
In a 529 Savings, you can use it for higher education (grad school), roll it over to another family member, or have the account balance returned to you. If you withdraw the balance for non-qualified expenses, you would pay ordinary income tax and a 10% penalty on the earnings.
Can the Florida Prepaid plan only be used in Florida?
No! Although, Florida Prepaid guarantees to cover costs at specific Florida Colleges and/or State Universities, the value of either a 529 Savings Plan or a Prepaid Plan can be used at schools throughout the country.
Where can I get more information about Florida Prepaid?
The Florida Prepaid website has all the information you need like taking a look at the different options they offer. You can also find more answers on their FAQ page.