You might want to sit down for this information about how college costs have been hurtling upward; you could need $100,000 or more to pay for a four-year college education.
Tuition and fees have advanced more than 6% per year on average in recent years. The annual cost for tuition and all expenses totals more than $30,000 at some schools, with some Ivy League schools breaking the $50,000 mark. How can you pay all that for four years (or more)? Well, buck up -- there are several ways.
Reasons to rejoice
First off, a little good news. Public schools remain more affordable than private ones, and many are top-rate, too. Better still, the reports of soaring costs typically reflect the "sticker price" of college, the published costs. In actuality, many students pay much less, thanks to scholarships, grants, and loans. In some recent years, the "net" cost of college has actually gone down! Still, the cost of higher education remains significant, and smart parents will need to plan for it.
Fortunately, there are a bunch of tools to help you. A state-sponsored 529 plan, for instance, can be an effective way to save, permitting you to sock away a lot of money in a tax-advantaged way.
Here are some more ways to invest for college.
If your young ones have many years of homework ahead of them before they enter any ivory towers, you're in luck. You may want to take full advantage of the power of the stock market, and assemble a diversified portfolio of strong stock performers or terrific mutual funds. Here are some categories to consider:
Dividend-paying stocks make a great foundation for a portfolio, as they tend to be established companies with reliable earnings. Better still, dividends from healthy companies tend to increase over time. Two candidates you might research are Merck
Including some international companies can be smart, too, as they'll offer some protection if the U.S. economy stalls for a while. You can get a degree of international exposure from American companies with significant operations abroad, such as ExxonMobil, but you'll get more foreign bang for your buck with internationally focused companies, such as Philip Morris International
Finally, consider adding a few aggressive fast growers to your mix, too. Some won't pan out, but those that do can deliver great portfolio appreciation. A lot of terrific names have been on sale lately. Perhaps look into Intuitive Surgical
Keep in mind that only money you won't need for at least five years, if not seven or 10 years, should be in stocks, as years like 2008 can happen. So consider shifting your college-bound assets into short-term investments as your child turns anywhere from 8 to 13 years old.
Once your kid is fast approaching college, your priority should be conserving your savings. Choices such as bonds, CDs, or money market funds can fit this bill, while offering you a little bit of interest, too.
College is expensive, but it doesn't have to be out of reach. A little planning now can save you a lot of grief later.
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Longtime Fool contributor Selena Maranjian owns shares of Intuitive Surgical and Gilead Sciences. Intuitive Surgical is a Motley Fool Rule Breakers pick. General Steel and Philip Morris International are Motley Fool Global Gains choices. Motley Fool Options has recommended writing a covered straddle position on Waste Management, which is a Motley Fool Inside Value selection and a Motley Fool Income Investor pick. The Fool owns shares of ExxonMobil and Philip Morris International. Try any of our Foolish newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.