Saving tips for the college education of your children

October 28, 2015
Planificación Financiera

By Lymari Vélez Sepúlveda

To think how you will help your children pay for college education may be a source of anxiety. This takes an extreme course as estimates suggest that by 2030 parents may need up to $350,000 to pay for four years of bachelor’s degree in a private U.S. college or university. The amount comes from a College Board information published in a Consumer Reports story. The amount includes tuition, room and board and books.

Confronted with this situation, it is recommended that you set up a systematic savings plan focused on your goal. To establish it, you should consider the time left for accumulation or available period to save. If you set up the plan when your child is in first grade, you can select a savings product with higher growth, but it will require a different strategy if your child is already in ninth grade.

Aside from the time available for accumulation, evaluate the cost of the colleges. The difference in cost from a private U.S. institution and the University of Puerto Rico (UPR), for example, is monumental. Moreover, studying at UPR could be even more inexpensive than the tuition in a private high school. However, regardless of the institution where your children will study, it is necessary to save money.

Savings strategies

Organizing your finances is the backbone of every individual and family economic initiative. Following are several strategies that will help you face the economic challenges regarding the college education of your children:

  • Education Savings Account (ESA): Plan in which you can contribute $500 annually per child. This money is tax deductible. But be aware, because that amount may not be sufficient to accumulate what is needed. Thus, this strategy must be combined with another instrument that may provide higher growth and that allows significant contributions.
  • Trust: Money saved in a trust that is administered by a third party on behalf of the child. The management entity may be an institutional trust (bank) or a person. Speak with your financial planner about this option, available to some customers according to their needs, profile and capital. The good thing about this plan is that the money will be used solely for your child’s education and is protected from bankruptcies or lawsuits against you. It is recommended for an institution to serve as managers as there are many compliance issues and maturity dates that if not complied with, may expose you to strong penalties.
  • Request of scholarships and other financial aids: Savings plans must be made supposing that both parents and children will make global contributions to cover tuition and fees. However, it does not hurt for you and your child to seek guidance to benefit from available scholarships and other financial aids, either out of economic necessity or in recognition of outstanding talent and grade point average. Moreover, consider the possibility for your child to participate in a work-study program, to lighten the financial burden.

For further savings advice and to know how to prepare a budget based on your present lifestyle and areas of opportunity, contact a financial consultant. (

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