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[S109]Save For Kids College

by Nocita Carter, Noc

You would probably agree, that your kids college savings plan is important. Should I invest the money I have saved for my child's education in stocks, bonds or annuity? Well, based on the amount of time you have to invest this money will determine what financial vehicle is best for you.

For instance, if your child is younger, the more risk you are able to take which may allow you to invest in stocks.

However, if you have less time to invest the money you have saved for college, a money market or certificate of deposit may be where you should consider placing those funds.

As part of my kids college savings, what is a 529 College Savings Plan? This type of plan allows you to save for your child's college education on a tax deferred basis.

The contributions made to the plan grow until your child takes money from the plan when he or she begins college.

As your child takes money from the plan to pay tuition, you pay taxes on the contributions made to the college plan based on your child's tax rate which is usually lower.

For my kids college savings plan, are there any tax credits available to help pay for my child's education? Yes. The Hope and Lifetime Learning Credits. These tax credits provide a dollar for dollar reduction in the amount of federal income taxes you may owe.

The Hope Credit can be used for college expenses incurred for the first two years of college, and up to a certain amount per year.

The Lifetime Learning Credit applies to tuition costs for undergraduates and graduate students. This credit can be used for a certain amount of your child's college expenses each year.

How can I pay for my child's college education if I do not have enough money saved? You or your child can complete a Free Application for Federal Student Aid(FAFSA).

The FAFSA application will determine whether or not your child, will be eligible to receive financial aid from the following programs: grants, work study, subsidized and unsubsidized loans. Your child can also apply for various scholarships for college.

The idea of financing kids' college education through long term financial planning is not new. For the past decades, parents have made the efforts to save and invest for the security of their kids' future. The government participates and creates several laws to support easier financial planning for parent. And up to now, the government has been improving the system of education and polishing the laws to better give the kids the right and secured education they deserve.

The result of years of improving the financial planning system is the creation of several options to effectively build up the necessary funds to send kids to college.

Here are some options for the financial plan to send your kids to college and keep up with the increasingly growing tuition fees in these educational institutes.

Prepaid-tuition plans.

Perhaps, one of the more popular long term financial planning options is the prepaid-tuition plans. It works like college-savings plans. It works by allowing you to save for college education in a tax-deferred investment. Prepaid-tuition plans are based on the present cost of college education and not the projected cost of college tuition in the time when your kids are due to college. So whether the tuition fee cost is doubled or tripled by the time your kids reach college, you will still pay the present cost of college education. Prepaid-tuition plan is for parents who want to take the game of stocks and bonds. Therefore, prepaid-college plans can be a less risky investment to make.

Another good thing about prepaid-tuition plans is that they are considered at parent's assets rather than the kids' money.

But in every financial investment there are expected drawbacks. Most prepaid-tuition plans do not cover other educational expenses such as dorm, lodging, and everyday expenditures. Prepaid-tuition plans also have the possibility of shutting down even before your kids get into college. This will result in loosing the money you have invested for a very long time.

Prepaid-tuition plans are currently available in 18 states (Illinois, Pennsylvania, Alabama, Virginia, Nevada, Colorado, Maryland, Kentucky, Mississippi, Tennessee, Texas, Florida, Michigan, Ohio, Massachusetts, South Carolina, West Virginia, and Washington). Meanwhile, the state of Alaska offers the prepaid-tuition plans as college savings plan option.

3.Individual Corporate Bonds or Stocks

A bond is a guarantee that you will be repaid with any amount you have invested on a company in face value, plus the fixed interest rate at a particular set date. Stock is a representation of a part ownership of a company. Making money on stocks is a long term process and quite risky. The market value of the stock may increase or decrease over time. Even from big and stable companies, stock fluctuations can be very unpredictable but if you end with on the winning side, investing on stocks is very rewarding. If you are a type of parent who does not take risks, this is not the type of investment you should be thinking of.

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Both Nocita Carter & Simon Oldmann are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Nocita Carter has sinced written about articles on various topics from Credit Cards, First Date and Insurance. Nocita Carter creates websites with tips on various subjects including . Nocita Carter's top article generates over 450000 views. to your Favourites.

Simon Oldmann has sinced written about articles on various topics from Cars, Food and Drink and Home Management. Financial plans and decisions are the things that will determine your future situation. Learn about making solid financial decisions and f. Simon Oldmann's top article generates over 450000 views. to your Favourites.