The idea of financing kids’ college education through long term financial planning is not new. For the past decades, parents have made the efforts to save and invest for the security of their kids’ future. The government participates and creates several laws to support easier financial planning for parent. And up to now, the government has been improving the system of education and polishing the laws to better give the kids the right and secured education they deserve.
The result of years of improving the financial planning system is the creation of several options to effectively build up the necessary funds to send kids to college.
Here are some options for the financial plan to send your kids to college and keep up with the increasingly growing tuition fees in these educational institutes.
Perhaps, one of the more popular long term financial planning options is the prepaid-tuition plans. It works like college-savings plans. It works by allowing you to save for college education in a tax-deferred investment. Prepaid-tuition plans are based on the present cost of college education and not the projected cost of college tuition in the time when your kids are due to college. So whether the tuition fee cost is doubled or tripled by the time your kids reach college, you will still pay the present cost of college education. Prepaid-tuition plan is for parents who want to take the game of stocks and bonds. Therefore, prepaid-college plans can be a less risky investment to make.
Another good thing about prepaid-tuition plans is that they are considered at parent’s assets rather than the kids’ money.
But in every financial investment there are expected drawbacks. Most prepaid-tuition plans do not cover other educational expenses such as dorm, lodging, and everyday expenditures. Prepaid-tuition plans also have the possibility of shutting down even before your kids get into college. This will result in loosing the money you have invested for a very long time.
Prepaid-tuition plans are currently available in 18 states (Illinois, Pennsylvania, Alabama, Virginia, Nevada, Colorado, Maryland, Kentucky, Mississippi, Tennessee, Texas, Florida, Michigan, Ohio, Massachusetts, South Carolina, West Virginia, and Washington). Meanwhile, the state of Alaska offers the prepaid-tuition plans as college savings plan option.
3.Individual Corporate Bonds or Stocks
A bond is a guarantee that you will be repaid with any amount you have invested on a company in face value, plus the fixed interest rate at a particular set date. Stock is a representation of a part ownership of a company. Making money on stocks is a long term process and quite risky. The market value of the stock may increase or decrease over time. Even from big and stable companies, stock fluctuations can be very unpredictable but if you end with on the winning side, investing on stocks is very rewarding. If you are a type of parent who does not take risks, this is not the type of investment you should be thinking of.
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