While college education is expensive, there are strategies you can use to help prepare for these impending costs.
When saving for college, starting early can make a significant impact on savings. The chart below shows two new parents who want to save for college – Liz (the blue line) and John (the green line.) While Liz starts investing today, John procrastinates for 5 years. In this example, John ends up with 40% less money than Liz when his child is ready to start college. Starting early can make a difference.
Put Time on Your Side
Assumes an Annual Rate of Return of 7%
This is a hypothetical illustration to represent the effects of compounding assuming an annual rate of return of 7%. It does not reflect an actual investment, investment expenses, or any taxes payable upon withdrawal which would lower the amounts shown. Returns are not guaranteed and may be less than or greater than the amounts illustrated.
Making regular investments, even if they are small, can greatly increase how much money you have saved when it’s time for college. The chart below shows the difference between investing once when a child is born and investing $100 monthly over 18 years. In this example, investing regularly results in over $42,000 more in the same time period.
Franklin Templeton’s Automatic Investment Program (AIP) makes it easy to invest regularly.
Click here to learn more about enrolling.
Small and Consistent Investments Can Make a Difference
This is a hypothetical illustration to represent the effects of compounding assuming an annual rate of return of 7%. It does not reflect an actual investment, investment expenses, or any taxes payable upon withdrawal which would lower the amounts shown. A periodic investment does not assure a profit or protect against a loss in declining markets. Returns are not guaranteed and may be less than or greater than the amounts illustrated. A periodic investment plan such as dollar-cost averaging does not ensure a profit or protect against a loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels; investors should carefully consider their financial ability to continue their purchases through periods of fluctuating price levels.
Friends and family want to help. Franklin Templeton makes it simple. Spryng, our exclusive crowdfunding tool, makes it easy for friends and family to contribute to your savings goals.
Take time to review which options are available and which ones offer the most advantages for your situation.
Comparing College Investing Vehicles
Franklin Templeton 529 College Savings Plan1 | Coverdell Education Savings Account1 | UGMA/UTMA | Taxable Investments | Savings Accounts | |
---|---|---|---|---|---|
Federal Income Tax-Free Savings | 2,3 | 3 | |||
Federal Income Tax-Free Qualified Withdrawals | |||||
Possible State Tax-Free Benefits | |||||
High or No Contribution Limit | |||||
No Income Restriction | 4,5 | ||||
Plan Owner Retains Control of Account | 6 | ||||
Use for Primary and Secondary (K12) Education | |||||
Ability to Change Beneficiary | |||||
Early or Nonqualified Withdrawals with Penalties |
Tax benefits are conditioned on meeting certain requirements. Federal income tax, a 10% federal tax penalty, and state income tax and penalties may apply to nonqualified withdrawals of earnings. Generation-skipping tax may apply to substantial transfers to a beneficiary at least two generations below the contributor. Gift examples are general; individual financial circumstances and state laws vary – consult a tax professional before investing. If the contributor dies within the five-year period, a prorated portion of contributions may be included in their taxable estate. See the Investor Handbook for more complete information.
Investors should carefully consider plan investment goals, risks, charges and expenses before investing. To obtain the Investor Handbook, which contains this and other information, call Franklin Templeton Distributors, Inc., the manager and underwriter for the plan, at (877) 4NJ-BEST. You should read the Investor Handbook carefully before investing and consider whether your or the beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in its qualified tuition program.
This material is not a recommendation of any particular security, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax professional, investment professional or insurance agent. Before making any financial commitment regarding a Section 529 college savings plan, consult with the appropriate financial professional.
Franklin Templeton 529 College Savings Plan is offered and administered by the New Jersey Higher Education Student Assistance Authority (HESAA); managed and distributed by Franklin Templeton Distributors, Inc., an affiliate of Franklin Resources, Inc., which operates as Franklin Templeton. No federal or state guarantee. Principal value may be lost, and investing in the plan does not guarantee admission to any particular primary or secondary school or to college or sufficient funds for primary or secondary school or for college. Please refer to the Investor Handbook for more complete information.
See the Investor Handbook for more information on Franklin Templeton 529 College Savings Plan, including sales charges, expenses, general risks of the Plan, general investment risks and specific risks of investing in Plan portfolios, which can include risks of convertible securities; country, sector, region or industry focus; credit; derivative securities; foreign securities, including currency exchange rates, political and economic developments, trading practices, availability of information, limited markets and heightened risk in emerging markets; growth or value style investing; income; interest rate; lower-rated and unrated securities; mortgages, asset-backed and credit-linked securities; life settlement investments; restructuring and distressed companies; securities lending; smaller and midsize companies; and stocks.