Planning for College: Help Making Wise Investments for Your Child’s Education

We’re taught from an early age to begin saving for retirement as soon as possible. But what about saving for your child’s education? Should you put money towards their education instead?

The short answer is no. You should only put money aside for your child’s education when you are confident that you are on the right track with your retirement planning and investments. That said, most people choose to put away money for their children’s education.

The most common vehicle for college savings is the 529 plan, but it’s seen a bit of a bruising in the financial crisis. Currently contributions to the plan are down compared to the last few years, and less parents are jumping to open the college savings plan if they don’t already have one in their child’s name.

Why? Parents are looking to make safer investments. Because most college plans are opened well before the child is of university age, parents have the ability to open a CD or other high-yield savings plan. Because rates are so low, remember: you’ll need to put away much more to get the same results as a well-managed stock plan. Though the returns are lower through savings plans, they are guaranteed in a way stocks are not. That’s not to say people aren’t still using traditional 529 plans: about 300,000 new ones were opened this year.

Many 529 plan administrators are reacting by offering more savings plans than investments with the money, so it is possible to have a low-risk 529 the way you can have a low-risk mutual fund portfolio.

Leave a Reply

Your email address will not be published. Required fields are marked *