Here at MEFA, we sometimes speak with families who find themselves with a child in high school and realize they have not yet started saving for college. They often ask, “Is it too late to save?” Fortunately, the answer is, “Not at all!” It’s never too late to start saving for college. While there are many benefits to saving for college early, it’s better to start late than to never begin at all. Here are the reasons why.
Lowering College Debt
Every dollar saved for college is a dollar that you won’t have to borrow and pay back with interest. So even if you don’t have a significant amount of time to save and earn interest on your savings, you’ll still benefit financially by avoiding having to borrow the amount you’ve saved. When it comes time to pay the bill, you’ll be able to pull from your savings rather than incur debt on the full amount owed.
Small Amounts Add Up
Even if you only have a year or two until college begins, starting to save now can allow you to accumulate enough savings to cover the cost of books and supplies for several years, or even one semester’s tuition. Setting up regular, monthly deposits into a dedicated college savings account will ensure that your savings total grows, and you’ll likely have a few opportunities to add unexpected cash earnings into your account as well, such as tax refunds and monetary gifts.
Tax Deductions
Massachusetts is one of several states that offers a tax deduction for those saving in a dedicated college savings account (such as the U.Plan or U.Fund). So if you’re in a participating state, you can deduct the amount you’ve saved on your state taxes (up to $1,000 for single filers and $2,000 for those filing jointly), which leads to even further savings.
Tax-Free Earnings
Dedicated college savings accounts in prepaid tuition plans and 529 programs also offer tax-free earnings when withdrawals are spent on qualified education expenses. So though you might not have a significant amount of time to earn interest, you’ll likely earn some, and you likely won’t need to pay interest on any of it.
Ready to start saving? Jump over to our U.Fund or U.Plan page to ready more about your options and to open an account. And if you have questions, we’re happy to help. Reach out to us at (800) 449-MEFA (6332) or [email protected].
