While many people consider college savings plans the same as college investment funds, there is a difference. When you save for college using standard bank or credit union accounts, you receive a stated return (interest) at a disclosed rate.
Technically, college investment plans generate earnings based on the performance success—or lack—of the college investment options you choose. You should also evaluate child investment options in light of the presence or absence of tax consequences for earnings and/or withdrawals.
College planning often seems like a daunting challenge when you hear or read about the cost of a university education. Unfortunately, college costs continue to escalate and projections indicate that those parents and students without college funding plans will come up financially short for education expenses. But, where can you turn for help with college investment plans? Here are some suggestions for college funding options.
• College counselors. Like professional career coaches, college counselors try to help students and parents navigate the maze of scholastic and financial planning needed to have a successful university experience.
• College investment planning funds. College funding options, like the Gerber Life College Plan, offer help and information along with programs structured to saving for college. With flexible options, you can plan for college at affordable investment dollars.
Saving for college is challenging, but you have some excellent options. When you save for college, knowledge is power. The key is to identify the college funding options that are best for you. Here are some proven suggestions.
- 529 College Savings Plan. College planning becomes easier and cost effective with a 529 educational savings account. Two features are primarily important: You can contribute up to your state maximum per year. Equally important, your earnings will grow tax-free.
Whether your child is still learning to walk and mobilize their toddler tools, or moving deftly toward college age, you should be saving for college. Here are some things to consider to start saving for college properly.
- Current age of your child. Children have a habit of growing up much too fast for most parents’ taste. If you haven’t yet experienced this phenomenon, you will. When you look at your 15 year old, you’ll see him/her at age two or three—which was only “yesterday.”
- College costs continue to increase unabated. When current Baby Boomers went to college, “expensive” tuition was around $2,000 to $3,000 per semester. This level applied only to more prestigious schools, like Harvard College, Boston College, and Stanford University. Today, in most cases, you merely need to add another “0” to estimate tuition.
- Classic and newer options to save for college. Classic
college savings options include savings accounts, CDs, investment accounts, mutual funds, annuities, and U.S. Savings Bonds. Newer college planning choices include 529 plans and Coverdell education savings accounts. The Gerber Life College Plan is another excellent option. It provides a “guaranteed benefit payment” for children expected to begin college in 10 to 20 years.
- Your current and projected financial condition. The recession of 2007 to 2009 taught us multiple lessons about financial uncertainty. Many who believed their jobs and finances were stable and secure received unpleasant surprises. We also learned that even the largest university endowment funds, from which most scholarship money comes, can be decimated by a down economy. Until—and unless—these funds recover strongly, millions of scholarship dollars will remain unavailable.