Here's Why Saving For College Is Not Enough

It’s no secret that the cost of a higher education continues to surge.

The College Board reports that tuition, fees and room and board charges at private nonprofit four-year colleges were up 14% over the five years from the 2008-09 to 2013-14 to $US30,094. In public four-year colleges they were up over 27% in the same period to $US8,893.

According to JP Morgan Funds, 69% of the money set aside for a college education is held in cash accounts because parents and grandparents are worried about the risk of investing in financial markets. But the interest on cash can’t keep pace with tuition inflation.

“In rolling 18-year periods since the late 1970s, cash has not kept pace with the average tuition increase,” according to JP Morgan Funds.

Rather than just saving cash, the analysts recommend taking risk and investing.

“A diversified 50-50 10% portfolio of stocks and bonds offers higher 8% returns than cash, and gives the investor the opportunity to achieve returns high enough to pay for Junior’s education.”

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.