Smart College Savings Plans
Expert advice, comprehensive explanations and comparisons on a selection of the most tax efficient and financially sound college savings plans for your child or children.
All parents want the best for their children. They invest time into building their child’s character and integrity, instilling in them core values that will hopefully stay with them through life. Many parents believe that if they spend the time preparing their children to face the world, it will be enough to make them successful.
Unfortunately, without a good college education, many of these intuitive, gifted young people will never fully reach their potential. Business leaders today place a large and unprecedented value on having a quality education from an esteemed college or university. Twenty years ago, having a college degree may have helped you get a promotion. But in today’s business environment, you need a degree just to get through the company’s front door, given the high unemployment rate.
Being able to afford that college education is difficult in and of itself. According to College Board, the annual cost of tuition at a four-year, in-state public institution for the 2011/2012 academic year is around $7,600, and one year’s tuition at a four-year private college will go as high as $30,000. These figures don’t include room and board, books, supplies, transportation, or personal expenses. If current trends remain consistent, educational costs could potentially rise by 5% to 8% annually. So as time goes on, effective saving strategies for college are only going to become more important.
Keep in mind that all college savings plans or strategies are not created equal. The best college savings plans offer lower expenses and special tax advantages to pay for college tuition. A smart college savings plan should hide your assets and help your qualify for financial aid. Structuring a tax-efficient college savings plan is important, and can increase the potential of accumulating more money over time (as opposed to a taxable college savings option). And there aren’t many college savings plans available that allow you to secure your child’s future in the event of your death, the death of your spouse, or a stock market collapse that affects potential investments.
Saving for your child’s college education requires a long-term commitment and sizeable monthly or annual contribution to a plan or policy. And just like with saving for retirement, the earlier you start your plan, the better. Use this college saving calculator to determine a sensible monthly contribution to your college savings plan. Click the “View Report” button for a detailed look at the results
The right college savings plan, structured in a tax-efficient manner and constructed during a child’s younger years, will allow for college education choices to be determined by their grades and SAT scores, as opposed to which options are most affordable, or the scholarships they receive. Following three are most viable and popular College Savings Plans are:
- 529 College Savings Plan
- Whole Life Insurance based College Savings Plan
- Bank CD or Money Market Account
The 529 plan may be viable for children up until 12 or 13 years old, because of the stock market investment component. 529 college savings plan offer few good tax advantages that no other plan offer except whole life insurance based. You would be able learn more and compare two most popular college savings options below table.
Savings for college through whole life insurance works best for younger children, due to the fact that life insurance policies require 10-12 years to grow in cash value. Whole life insurance savings plans enjoy the advantages of “invisibility for financial aid,” so this kind of plan is also very smart for high school level student. Essentially, this plan will allow you to hide some of your assets on your FAFSA application for financial aid calculation purposes.
Please call (877) 972-3262 to speak with one of our highly trained expert college savings planners now. Whole life insurance based college savings plans provide almost all of the advantages 529 college savings plans do, while also eliminating their disadvantages.
If there are only a few years before your child goes to college and if you do not qualify for life insurance based plan, a bank CD or money market account would be the best saving for college option, even though there are no tax advantages and no death or disability protection.
Many parents today underestimate the huge financial commitment involved in financing a college education. If your child is pursuing a degree in law, medicine, or other vocation that requires additional years of schooling, it becomes the second-largest investment in a parent’s lifetime, second only buying a home. That’s why planning for your child’s education has to start when they are very young – perhaps even during pregnancy.
Request a personalized college savings proposalfor your children/child, or call (877) 972-3262 to speak with our experienced college savings specialists free.
