How to Save for Your Child’s College: Part 2
Step #4: Choose your college savings plan wisely.
Now that you have an idea of the different college plans out there. It’s time to time to make a decision on where you are going to place your hard earned dollars.
There are 3 major benefits that a good college savings plan should have:
- Guarantees. In other words, every dollar you put into the plan should be guaranteed to be there when you need it for college. So many times, I have seen families ignore this step. And instead put their money at risk and then lose money right before their child was about to enter college. Why would a parent make this mistake? Because so many parents have been led to believe that they HAVE to forgo guarantees in order to stay ahead of college inflation. This is the wrong way to look at things. A smarter play is to adjust how much you save per month if you want to have more in your account.
- Liquidity. You need to be able to get to your money for college expenses when you need it – without penalty. Plain and simple. But it’s also a good idea to have access to this money in case something else comes up. Such as a medical emergency or a job loss and an extended unemployment period. Or for the outside chance your child doesn’t go to college.
- Not included in the financial aid formulas. Some accounts hurt you for aid, while others don’t. You shouldn’t be penalized for saving for college. A lot of families assume they will never qualify for aid. Don’t make this mistake. I have seen a family with more than $400,000 of adjusted gross income quality for aid. Granted, this was a special circumstance. But the point is, financial aid is one of the biggest sources of free money for college. Don’t hurt your chances for aid by ignoring the formulas.
Step #5: Monitor your college savings plan on regularly scheduled basis.
This one is pretty clear-cut. A quarterly, semi-annual, or annual look at how your college savings plan is performing is a good idea. Consistently asking yourself, “am I making progress with this account?” And, “do I need to make adjustments to it?” Will keep you on track.
There you have it, a complete 5-step system for saving for your child’s college education. But like any guide or system, it only works if you put it to use. So get to it!
To your successful college funding,
Scott Weingold
Publisher, CollegeMadeSimple.com
*If you haven’t yet read it, here’s part 1 of: How To Save for Your Child’s College
Related Articles:
What to Look for in a College Savings Plan
The College Savings Crisis
The College Savings Crisis: Part 2
