How Can You Avoid Going Broke When Saving For College? - Page 2© Arman Rousta
Page 2
Jan 22, 2004
The next key task is to evaluate the different college savings options. If you have not heard the good news, the government has recently passed a law known as Section 529, which allows you to save in designated mutual funds called 529 Plans that grow entirely tax-free. This can equate to thousands of additional dollars compared to what you would earn in ordinary mutual funds or stocks. Visit 401kid.com for a reference guide of on all available 529 Plans, and consider the 401kid Gold Membership which determines which 529 Plan(s) are best for your family.
While many get discouraged at the astronomical costs of education, keep in mind that there are so many other creative alternatives to financing college education. Here is a short list of alternative college savings strategies:
1. For starters, most bright and ambitious student can go to a public community college for a year or two, achieve high marks, and then transfer into more expensive public or private colleges thereafter, knocking out two years of high expenses. the degree only lists where you graduated from.
2. Joining the Armed Forces may be an excellent solution for certain students. Major support for educational expenses is available, not to mention the education and life discipline that can be achieved while in service.
3. Ambitious and organized teenagers may benefit from taking a couple of years off from school to pursue employment and/or vocational training of some kind. This is often a good opportunity to learn the value and challenge of earning a living, while stashing some funds away for college in the coming years. Such an approach often prepares kids to be able to handle the dual load of employment and college simultaneously, a challenging but invaluable lesson in life management.
4. If all else fails and you decide to make a push for to send your kids to Harvard, you can hit up the 401(k) retirement account or take out a (second) mortgage on the house. Please speak with your personal financial advisor before considering either of these strategies, which do present financial risks and could negatively impact your own retirement plan. Remember, once you retire, that's it - no more money is coming your way, unless you want to depend on government programs or family support. Although loans from your 401(k) are penalty-free, you still want to think long and hard about reducing these invaluable savings. These are just some of the alternatives to going broke while saving and paying for college. Mind you that, depending on your financial status and merits of your children, there may be significant financial aid or scholarship dollars available as well. However, it is difficult to plan for such support while your kids are still young. The number one message to take from this is to start saving something, anything, whatever you can afford, as early as possible. Do not worry if it is not going to cover total cost at the most expensive colleges, just save what you reasonably can and the rest will fall into place.
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