Investing For College Education
Today, college education is a costly affair. Investing for the college education is a necessity nowadays. The college cost involved includes direct cost like tuition fee, lodging fee and indirect cost like the cost spent on books, medical, transport etc. It is estimated that a child born today will be paying four times more fee in future for his college education as compared to current college cost.
For the same reason, start investing for the child's education as early as possible. The longer the period you save, the more money you gain by acquiring interest on that money. Parents have a number of options to choose up on for college fund investment. The first step in choosing the investment plan is to decide how much you need to save for the education so that you can achieve your goal on time. The second is to decide on the investment plan. Whether the plan chosen affects our taxes or financial aid or not, you need to consider the following issues carefully:
1. How to use the plan to save the money
2. What happens to the money in case the child does not go to college. 3. The minimum and maximum requirement for donation. Some of the major ways in which the money can be saved and invested for a child's education are as given below: * Try investing in the parent's account. The government wants that a student should himself contribute some portion of the college fee on his own. This amount is nearly 29 to 30 percent of the total college fee. Thus, investing in the parent's account instead of investing in the child's account would involve more benefits. * One can go for 529 Qualified Tuition Plans that give an opportunity to lock future tuition fee at current prices. They also facilitate investing in mutual funds. The 529 plans are tax free until and unless they are used for paying for the college expenses. Else they are charged a tax like income and an additional 10 percent penalty tax also. * Educational IRAs can be made use of not only for meeting the college cost but also for elementary and secondary school education. If an IRA plan is chosen for meeting the educational expenses but is used for other purpose, tax is charged both as income and 10 percent penalty tax. If it is found that you are still not in a position to meet your college expenses then there are other options too called financial aid packages to help you. A financial aid package is a combination of loans, grants, work studies and scholarships. A financial aid is defined as an aid that bridges the gap between what you can pay for your college expenses and what the college cost actually is. These calculations could be done with the help of online financial aid calculators available on various sites. Thus, there are a number of college fund investment options in the market. Go ahead and decide the best option that suits your requirements.
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