Investments

As a parent, the big financial concern with a newborn is how to set aside enough money to assist for a college education. Universities and state governments have developed many different financial savings plans to encourage parents to save money for college. Some of the plans include 529 accounts, Coverdell accounts, Roth IRAs and prepaid/guaranteed tuition costs. Unfortunately, few of the programs offer every benefit such as tax deductions, tax deferred savings, unlimited investment options, self directed investments and no penalties.

Bank Of America Investment Selecting a university is a critical and expensive decision, and in my view it is foolhardy to make before the last couple years of high school. A drawback of the university-based or state-based plans (such as a 529 account) is that they impose penalties if a child doesn't attend a specific university or in a specific state. Who knows what aptitudes, skills or interests your child may develop that necessitate a specific school that is out of your home state. University and state-based plans also impose penalties if the money isn't ultimately used for qualified college expenses; another example where an event that is out of your control and may cause an unneeded expense. But the biggest problem with university and state programs are the financial rule changes they make - after you start the plan.

Finally, do not neglect your regular savings program for your retirement, in favor of saving for college. Saving into tax deferred retirement accounts is usually the best possible investment that you can make. Furthermore, your retirement accounts are ignored in the college financial aid formula. And, if necessary, you can use your retirement savings to pay for college by either withdrawing (without penalty) from your IRA accounts or taking a loan from your 401(k) plan.

Investment Opportunity To me, the university and state-based programs are a lose/lose savings plan for parents. If the cost of tuition rises faster than forecasted, in spite their guarantees, they raise the price and leave you under-funded. Conversely, if tuition rises less than forecasted, then you end up overpaying for tuition. And the same applies to the stock market some plans force you to invest in; when the market fell in 2000 and 2001, many plans broke their promise to guarantee full tuition funding in spite of promises to the contrary.

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Banc Of America Investment Another drawback of state-based plans is that your investment options are severely limited to a few mutual funds run by the brokerage firm operating the account. I have evaluated several: and they have high fees and poor returns, and I'm wary of the lack of competition for many of these accounts. The brokerage firms blame economics for the lack of investment choices, saying that most of the accounts are small and not very profitable for them, so they want as little trading and customer interaction as possible. More reference material for this article is available at http://investing.real-solution-center.com.

The cost of attending college represents one of the largest expenditures ever to be incurred by parents. Planning and saving for college should begin as early as possible. This program will assist you by estimating how much you will need to save on an annual basis. Using suggestions from the program hints, you will enter details regarding the expected cost of college for your child and the expected earnings on your college savings. The program will then print an investment schedule for each child. This schedule can serve as your investment goal, which can be reviewed and revised as conditions and assumptions change. The program also provides recommendations and information about what types of investments to consider, education tax incentives, and college financial aid.

Banking Investment The federal college savings plans are better because they allow the widest selection of investments (such as an educational Roth IRA or other education savings accounts), and can be applied to most any accredited university. These accounts offer tax-free growth and withdrawal is also exempt from federal taxes and some states taxes. Realistically, your situation may call for multiple accounts. Rules prohibit you from using these if your income passes certain thresholds.

[1]Purchase a new or used car through the Upromise Auto Buying program by September 30, 2008 and you will qualify to earn $.10 college savings per gallon for gasoline purchases made at Exxon and Mobil locations between September 1, 2008 through November 30, 2008. The maximum college savings earning potential from the gas promotion is $100 in college savings. The college savings you earn for qualifying gas purchases will be posted to a member's account in December 2008. This promotion is not sponsored by Exxon Mobil Corporation or its affiliates.

Investment Solution Strategic In my opinion, the best place to start saving college is with U.S. government ibonds from TreasuryDirect.gov. These bonds offer the most flexibility and control, and require none of the paperwork and rules of other savings plans. They accrue a decent rate of interest every month, the principal is adjusted for inflation each quarter, the income tax is deferred, and you don't have any brokerage fees. And when the money is withdrawn for a university on their approved list, the money can be redeemed tax-free. (As for limiting rules: you cannot withdraw the money in the first year, and if you withdraw it within five years, there is a three month interest penalty - so ibonds are not the best savings plan after a child reaches about age twelve). Since ibonds are simply savings not an educational account, the money can be spent for any type of expense that may arise.

Investment Banking Services The government and brokerage firms keep updating these accounts, so my complaints will hopefully become moot in the near future. But the criteria that you need to watch for are: many investment options, few penalties, no taxes and total control. These will maximize the money you're setting aside for that expensive degree.

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Alternative Investment Francis Kier has an MBA in finance and shares his two decades of experience with investing and personal finance.

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