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Dividends & College Planning Do Make Sense

It’s that time of year again, when the air starts to get a little cooler and many American families embark on one of the newer rituals of our time: dropping little Johnny or Susie off at college. Despite the pressures, a college degree continues to be a major requirement for many well-paying jobs. And with that in mind, enrollment continues to rise pretty much across the board.

But there’s one slight problem with all of this. College now costs an arm and a leg to attend.

Our newfound rite of passage, and perhaps necessity, continues to get more and more expensive each year. In order to avoid crippling student loan debt, many families have turned to saving some big time bucks for Johnny’s future college costs.

Typically, the bulk of those savings have been made into a 529 plan. And 529s are a great place to start. However, investors may be doing themselves a disservice by placing so much of their college savings into such a vehicle. A better way could be found through dividends.

Saving More in the Wrong Vehicle

The good news for parents is that we are saving more for our children’s educations. According to Fidelity Investments’ 10th Annual College Savings Indicator Study, 72% of American families are currently saving for their children’s higher education needs. That’s a big 24% increase since the study was first conducted in 2007. And it’s awesome news considering that tuition rates for today’s one year olds will run between $40,000 and $70,000 per year depending on what kind of school they enroll in.

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