Not Saving for College: The Ugly Triple Threat
If your children are young you might assume that you still have plenty of time to save for college.
If you procrastinate, however, you will face an ugly triple threat. Let me explain:
When you save for college, all that money that piles up into your college account over the years enjoys the benefit of compounding. Here's an example from the Vanguard Group, a major 529 savings plan provider, of how a hypothetical account could grow:
Okay, you're thinking this is hardly mind blowing stuff. Of course if you save, you will have more money to spend for college expenses. Duh.
$1 versus $3
What will surprise you, however, is the severe price that you pay for not saving and instead borrowing. The borrowing costs are going to be far higher than you could possibly imagine. In our hypothetical example, let's look at the financial consequences of borrowing rather than saving $39,000.
Here is the take-home lesson:
Every $1 you stash away for college will save you from borrowing $3. Procrastinate and your college costs can easily triple.Obviously when you consider the high cost of borrowing, saving every dollar you can now is truly a no brainer.
Lynn O'Shaughnessy is author of The College Solution, an Amazon bestseller, and she also writes her own college blog at The College Solution.
College cost image by jay d. CC 2.0
More on CBS MoneyWatch:
10 Cheapest and Most Expensive 592 PlansWhy 529 Plans are Great for the Wealthy
The No. 1 Fear of 529 Plan Investors
