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Planning higher education? Saving for college is the most sensible option

March 29,2012 by: Dallas Browne

If your objective is to pursue higher education, then saving for college is the most sensible thing to do. Savings will ensure that the student does not have to borrow money for education through a loan, Federal or private lenders, and thus not be bound by the terms and conditions dictated in the loans. The terms and conditions usually dictate the duration of lifetime that the student is supposed to have in repaying the loan, and also the terms of repayment including the loan fees and the loan interest rates. Saving early for college is thus the responsibility for every household that wants its children to pursue higher education, without the burdensome student loan. Saving for college is an indication of financial freedom, and is a peaceful approach to furthering education and career.

Since college education expenses are growing at a rapid speed, therefore, students and their families are required to begin planning for future college education from a very early age. Proper planning for the future can save you a lot of worry and money. Every responsible household should plan on saving the money for quality education of their children. There are multiple aspects of saving for college, and these should be carefully considered, while planning for the same. When planning college savings, it is ideal, if you plan savings for the complete four years of college, and not only for the initial admission fees and yearly fee, because otherwise you may have to procure a college loan in the midway of your college term. Getting a loan midway can be comparatively difficult than getting a loan at the beginning, because lenders usually provide loans for the entire college course and not for a part of the course.

You should first choose the right type of college saving account for your child, which could be an overwhelming task, given the multiple options that are presented for college savings. The different categories of college saving plans include Section 529 plan, the UGMA, the Roth IRA and trusts. Choosing from these multiple options can be a confusing task for the parent, but the parent should make sure to compare the various parameters of all these different saving plans before choosing a suitable college saving investment option. Poor planning and bad investments are not permitted even in college savings, as in any other saving program. For instance, saving for college funds by using the Life insurance contract is not a good idea for a variety of reasons. Although insurers will encourage you to use the life insurance plan as a vehicle for college benefits, yet they would fail to mention that you will have to pay income tax on your gains when you are withdrawing the money from your life savings account. Using the 401k plan and the high risk/high return stock market investments is similarly not a good idea to expend for college savings.

So, plan carefully and give a hassle-free college education to your children.


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