Saving For Your Child's Future College Expenses

Have you been thinking about your child's future recently? What college do you want your child to go to? What are the costs involved? Do you have the financial resources to send your child to the preferred college? These are important questions that need to be asked while your child is still young.

The costs of sending a child to college can come up to quite a substantial amount. The actual cost will depend on several factors. For instance, the choice of college will have an immediate impact on the cost. Some courses will cost more than others. Or what if your child needs to stay in college an extra year due to illness just so he or she can graduate from college successfully? These variables all play a part in the cost of education. As a parent, your role is plan ahead for your child.

Let's say you have calculated the cost of education to come up to about $100k for the entire duration. Do you have the entire amount stashed aside solely for your child's education? Would $100k be enough to set your mind at peace? Most people do not have the entire amount stashed away somewhere. When the time comes for your child to pick a college, will you have enough for him or her? If you don't, the consequences can be disastrous. As parent, you want your child to be happy - to be happy to pursue his or her own interests and not have to worry about not being able to land a job. The right college will make all the difference to your child's future. Having the financial resources to send your child to the right college may appear to be a formidable goal. But it can be achieved with proper planning.

What you want to do, is to sit down and think about saving up for the future. A portion of your monthly income should be set aside solely for the purpose of financing your child's college education. Note that education costs are always on the rise. So when planning ahead, make sure you take into consideration inflation and the rising cost of education. A qualified financial planner will be able to help you compute the exact amount you need to set aside each month to achieve your targets.

A few things to remember. It's always wiser to start early than to start late. When time is on your side, you can put aside a much smaller amount each month and still be able to save up enough to meet your financial objectives. If you start late, you will be forced to set aside a huge amount of money on a monthly basis - something that you may not be comfortable with as this may affect your current lifestyle.

Learn more from a financial planner specializing in 401k rollover and Roth IRA Rollover for retired individuals.

Original article

The Best Investment to Start Saving for Your Child's College Tuition

One of the biggest issues for new, or relatively new, parents is how to pay for their child's future education. It is no secret that the cost of a collegiate education is skyrocketing. The average cost of tuition for four years at a public state university has risen to around fifty thousand dollars. For private schools, this number can exceed two hundred thousand dollars. With a rising percentage of students taking five or more years to graduate instead of the traditional four, this number can be increased by twenty percent or more. And these are 2011 prices - just imagine what they will be in 2029, when today's new children will be at college age! Parents have to prepare as if these costs will continue to rise.

Not long ago, saving for a child's education was a luxury more than a necessity. Students could always take out loans and pay for their own education, then pay it out over a few years after they get a job. In today's world, this leads to students being saddled with a ton of debt coming out into an uncertain job market. This is not an ideal scenario that any parent would want for their child. The ability to pay for an education straight up is more important now than ever before. As loan debts and interest rates on that debt rise over time, this becomes even more important.

So, how should parents save for this huge cost going forward? I am not about to make specific investment advice, especially in this economy. Rather, the best solution is to put a certain amount of money away from each pay check and invest it into safer investments for that have lower returns, but much less risky. This way the number not only will grow with monthly allotments, but the money will also compound on a regular basis growing on itself.

Not to venture into a finance lesson, but this is best displayed through a hypothetical scenario. We will start with the month of a child's birth. Let us assume a take home salary of $3000 per month. Let's put 5% of this ($150) into the college on a monthly basis. For the purposes of this study, we will ignore the possibility of any future raises or escalators. Obviously those would significantly help the contribution. We can put this money into a safe steady growth fund - for the purposes of this hypothetical, we will say 3% annually. This amounts to 0.25% per month.

I will not bore you with the financial equations, but after 1 year, this account will have grown to $1824 on a principal of $1800 monthly installments. Within 2 years, this account will have grown to $3705 (on a principal of $3600). Within 5 years, the investor will have almost $9700 on a principal of $9000. After 18 years have passed, this account will have accumulated almost $43000. Now, that is a pretty nice nest egg to apportion to your child's education. Obviously, if you contribute more or net a higher rate of return - this number will be significantly higher.

How do you intend to save for your child's college education? Or, even more expensive, medical school tuition? Here's an article on the rising numbers from Chicago Tribune. Learn more about financing here.

Original article

Help! I Need to Start Saving for My Kid's College Education

It's the American Dream. To have your kids grow up and go to college. To graduate from a university. To have earned the right to have those little letters after your name BA or BS. To know that your child is on the right track. The he or she has the world at their feet. Opportunity is abound. Oh what a joy as a parent to know that you did as much as you could to help them get to this moment. You helped with their homework. You drove them to their after school activities. Bought their clothes, cheered at their games. Just one little thing you forgot, HOW AM I GONNA PAY FOR THIS??

It is true that college is part of the American Dream. Not only is it part of the dream, it's a necessity. College graduates earn more over their lifetime on average than those that did not attend college. In today's economy your child will need every advantage he or she can get to help them find a good paying job, if they're lucky they will even be offered benefits. Probably one of the biggest, if not the biggest, obstacles they will have to face is paying for college. Let's face it, college costs a lot of money. According to Regional average data: College Board "Trends in College Pricing" 2010 in 20 years the cost to attend a public regional commuter college, in 2030, will be $53,023.00. The following year it will go up to $55,674.00. The year after that is will be $58,457.00 and $61,380.00 the year after that. The cost for a 4 year college education for someone attending a regional college in 2030 - 2034 will be $238,534.00.

Right now in Chicago you can buy a nice 3 bedroom ranch style house for under $200,000.00. You'll be paying more for your child's education than you just paid for your house. It's time to think about saving for college.

One way is to establish a 529 plan. The definition and benefits of a 529 plan as stated in the IRS publication entitled "How 529 Plans Help Families Save for College and How the American Recovery and Reinvestment Act of 2009 Expanded 529 Plan Features"

In summary - A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996. 529 plans offer tax savings. Although your contributions are not deductible on your federal tax return, your investment grows tax-deferred, and distributions to pay for the beneficiary's college costs come out federally tax-free. The tax-free treatment was made permanent with the Pension Protection Act of 2006. There are also downsides to a 529. These plans are usually run by outside fund managers. This adds risk to the fund. In 2008, 89% of all 529 plans lost money.

Another way to save for college that offers less risk is to establish a high yield fixed flexible annuity. A high yield fixed flexible annuity offers tax savings as your money grows tax deferred. The annuity is fixed so the rate of return is guaranteed. If the stock market takes a plunge your finds are safe. It's high yield so you money grows at a rate of return that is usually better than any bank CD or Money Market can offer. There is a downside, if you withdraw the money before age 59 1/2 you have to pay a penalty of 10%. That's 10% of the interest earned, not on the principle. A flexible annuity also lets you self direct the investment. You have the option of investing your funds in any investment vehicle you want but doing so will release the issuing company from guaranteeing your rate of return.

Another big piece of advice is to keep the account in your name, not in your child's. Right now your child maybe a bundle of joy. In 20 year that could change. Maybe your child got involved with the wrong crowd or has issues. You don't want to give someone a large sum of money that can possibly do more harm to them. Also, if the account is in your name, they won't be penalized when it comes time to apply for financial aid.

Congratulations! You now are on your way to save for college.

Michael J. Ferro
President
Ferro Financial Services, Inc
http://www.ferrofinancialservices.com/

Original article