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Thinking About Sending Your Child to a Private High School?

Written By Gary Williams, CFP®, CRPC®, AIF® August 23, 2019

There are many reasons why parents may consider sending their child to a private school; from the varied curriculum, these schools are able to offer, to smaller class sizes taught by dedicated and highly qualified teachers.

It’s not required that you know where you want to send your child to high school the day they are born, but it is important to start saving early for their education needs.

In recent decades, rising tuitions have outpaced inflation resulting in it becoming even more expensive to fund a child’s private education. This fact, combined with the miracle of compounding returns, is all the more reason to start saving as early as possible.

What Could It Cost to Send Your Child to a Private School?

For planning purposes, I would like to map out some rough figures to show approximately how much needs to be saved starting at a child’s birth in order to fund their future private high school education, assuming tuition inflates by 5% per year, and your investments return 6% per year. With that being said, let’s calculate how much it would cost for your child to attend McDonough or Loyola Blakefield for only their high school years. Assuming you have $0 saved for your child’s high school expenses the day they are born, and your child doesn’t receive any other financial support, you will need to save $10,430 by the end of the next 17 years in order to fund a 4-year education at McDonough high school. You would need to save $7,060 for the next 17 years in order to fund a 4-year education at Loyola Blakefield. While these numbers may look daunting on the surface, if you save on a monthly basis instead of waiting until the end of the year to make a lump-sum contribution, the required monthly savings come out to roughly $850 for McDonough and $575 for Loyola Blakefield.

How Can You Afford to Pay For Your Child’s Private School?

There are several methods through which this savings goal can be met. A few examples are: a routine deposits into a savings account, the use of a Coverdell Education Savings Account, or even the newest savings fad of rounding up purchases to the nearest dollar that then save the change for you through apps such as Qapital and Chime. In addition to these methods, it is important to note that you can now save for a child’s private school education through a tax-advantaged, state-sponsored 529 Plan. The 2017 tax reform package expanded the 529 benefits to include tax-free withdrawals for private, public or religious elementary, middle and high school tuition. This allows families to use 529 plans to pay for up to $10,000 in tuition and book expenses. 529 plans offer both tax-free earnings growth and tax-free withdrawals for Maryland residents when the funds are used to pay for qualified expenses. Since all states have not adopted this rule, consider speaking with your tax-advisor to discuss your unique situation. These attractive features can boost your savings and help you reach your funding goals.

If you are considering sending your child to private school, start saving early and consider working with a financial advisor to assist you in navigating the ever-changing investment landscape.

In the wise words of Benjamin Franklin, “An investment in knowledge pays the best interest”.

Let the CERTIFIED FINANCIAL PLANNER™ professionals at Williams Asset Management help with your wealth management needs. Whether you need comprehensive and holistic financial planning or investment management, we can help!  We are fee-based, independent financial advisors located in Columbia, the heart of Howard County, Maryland.  Schedule your complimentary consultation today by calling (410) 740-0220!

*The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10-percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.

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