Top savings challenges and how to overcome them

Since you're planning for future college costs, you've already overcome the biggest obstacle—getting started. Now let's look at how you can tackle 3 more common education savings challenges—rising tuition, unpredictable market returns, and saving on a tight budget.
 

The number One Challenge 1: Rising tuition

 

Situation: College tuition is rising but at a slower pace. From 2001–2012, tuition increases for 4-year public colleges ranged from 5.7% to 13.3% per year. However, from 2012–2018, the same schools raised tuition by only 3% each year.*

 

Solution: You can't control tuition prices, but you can control how much you save from now until your child starts school. Plus, earning compound interest on your savings may help offset tuition increases.

As high school graduation draws closer, you may feel like it's too late. But saving now can still make a difference. Just consider this hypothetical example:

Emma's parents have saved a total of $6,000 in a 529 plan account for her education. Now that she's in middle school, they're more serious about building up that account. They decide to invest $200 a month toward her tuition at an in-state public college.

Over the next 6 years, Emma's account earns a 5% average return, giving her almost $25,000 to help her pay for college.

A hypothetical graph of market volatility from 2019 to 2025, showing a savings of $24,917 by 2025

Source: Calculated using the Bankrate compound interest calculator

 

This hypothetical illustration does not represent the return on any particular investment and the rate is not guaranteed.
 

The number Two Challenge 2: Unpredictable market returns

 

Situation: Over the last several months, we've seen stock market volatility, creating an investing dilemma: You want to stay ahead of rising tuition costs, but you also want the money available when you need it.

 

Solution: Consider investing strategically in a diversified portfolio. In the NY529 Direct Plan, you can choose an age-based option, which shifts your investments automatically over time. Similar to target-based retirement funds, age-based options are designed specifically to help you invest for college. These funds move your investments from aggressive to conservative mutual funds as your child gets older.

If you want more control over your investments, you can shift these investments yourself, allowing you to find an optimal balance between risk and return.

 

The number Three Challenge 3: Saving on a tight budget

 

 

Situation: If you're like many families saving for college, your household expenses compete with your savings goals. Contributing $150–$200 monthly to your 529 account seems unrealistic. After all, you still need to save for retirement and pay your bills.

 

Solution: Ask family members and friends to consider using Ugift® to contribute to your 529 account on special occasions. Small gifts can add up to thousands of dollars over the years. NY’s 529 Direct Plan, allow you to create a code that makes it easy for others to deposit money into your account. Graduations—from kindergarten through high school—are a natural time for family and friends to add to your child's savings.

As an added bonus, if you are a New York taxpayer, you are eligible for a New York state tax deduction up to $5,000 ($10,000 if you’re married filing jointly) for contributions to your NY529 Direct Plan account.** But don't wait until tax time—you'll need to invest in your 529 account by the end of each calendar year to take advantage of the benefits.

For most people, there's no easy way to save 100% of college costs. That's why it's important to set realistic goals. Every dollar you save now may make a difference in your child's future.

*The College Board:Trends in College Pricing 2018

**May be subject to recapture in certain circumstances such as rollovers to another state's 529 plan, nonqualified withdrawals, or withdrawals used to pay expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

For more information about New York's 529 College Savings Program Direct Plan, download a Disclosure Booklet and Tuition Savings Agreement or request one by calling 877-NYSAVES (877-697-2837). This document includes investment objectives, risks, charges, expenses, and other information. You should read and consider them carefully before investing. Before you invest, consider whether your or the beneficiary's home state offers any state tax or other benefits that are only available for investments in that state's 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

All investing is subject to risk, including the possible loss of the money you invest.

Past performance is no guarantee of future returns.

Diversification does not ensure a profit or protect against a loss.

We recommend that you consult a tax or financial advisor about your individual situation.