A Final Word
By Harold Simansky
Educational Investment Advisor
As we emphasized at the start of these articles, a college education is the
greatest investment you can make – but it is undeniably pricey and this
situation is not going to improve as your child grows up. What better
argument for getting started on a savings plan as soon as possible?
In our discussion of the many decisions parents like you face in saving for
college, we have covered the advantages and disadvantages of a variety of
savings programs and showed you some ways to maximize financial assistance and
your investments. We could not, of course, touch on all of the savings programs
available out there, and two additional options may be worth considering. One
is U.S. Savings Bonds, which under certain circumstances
are tax-free if used for education. The other is Individual Retirement
Accounts, which may be used penalty-free for education.
Saving for college involves making many choices, and making them wisely. We
hope these articles have provided you with a useful roadmap as you get that
important savings program underway. Here, again, are the basics for managing
and achieving your family’s educational goals.
Understand how much school will cost,
how much financial aid you will receive,
and how much you need to save.
Identify the savings vehicle that best fits your needs.
Start by understanding the difference between a taxable and a tax-advantaged
vehicle. If you choose a tax-advantaged vehicle, be sure you are willing to pay
a penalty if you do not use the money for education.
Whether you choose a taxable or a tax-advantaged vehicle, understand your
different options (as detailed in
Article Five - "Which Plan is Best for You?") and see which one best
suits your situation.
Find a provider for the investment vehicle you have chosen.
If you are considering a 529 Savings Plan, investigate your own state’s plan.
There may be state tax advantages. That said, in many state’s there is no
advantage in choosing the state-sponsored plan, so you are better off in a
lost cost plan like the Iowa or Minnesota 529 plans.
Keep costs low. Avoid paying any sort of commission or "load." Look for mutual
funds with low expense ratios
Don’t focus on performance. Performance varies from year to year. You will have
better luck with a low-cost index fund.
Invest the money properly.
Identify a mix of stocks and bonds that is right for you, based on how old your
child is and how many years of investing you anticipate. (See Article Nine - "Investing Your Money"
for recommended asset allocations.)
Know your limitations.
Be prepared to hire a financial advisor if you don’t feel confident investing,
or if you need further assistance
The most important thing is to get started as soon as possible so... Start Saving!
Article #9 -
Investing Your Money
About the Author
Harold Simansky is the founder of Educational Investments, LLC, (www.educationalinvestments.com
a Registered Investment Advisory firm focused on helping families save for
education. His book, College Costs How Much?! The Workbook to Help You Save for
, which explains the financial aid process, is available at
. You can send
him an e-mail at Harold@edinv.com