Tools Like Short Term Personal Loans to Grants Can Fund College
A lot of parents look to short term personal loans when it comes to funding their child’s college education. This isn’t normally their first choice, but due to bad planning or a lack of, it is a necessary move to meet expenses. For any parent thinking about a child’s education, there are a few rules of thumb to remember. Here are some tips on the best way to manage.
Saving should start soon
The basic rule with any savings plan is that time is of the essence. There can be a huge difference between saving for two years and saving at the same rate for ten. When it comes to funding college, it’s best to start an investment account for children when they are young. Investing only $100 a month for eighteen years at an 8% annual return will yield $48,000. Although that may sound like a good amount of money, remember that tuition goes up and there can be a huge difference between education costs this year and education costs at the same college in eighteen years from now. Parents should always plan for inflation when they are deciding how much to save monthly.
What vehicles to use
When thinking about how to save, a portfolio that focuses on stocks is the best way to build savings for long-term goals. This is why starting to save early on is important. A good portfolio grows with time and managing it well can bring the return needed to fund college. As a child gets older, parents can shelter their returns by switching more money into bonds and liquid assets. Portfolios are flexible and that is where their strength as savings tools are most apparent. If parents want, they can also invest in mutual funds and allow a professional to take charge of savings. This can be a great advantage too because parents aren’t tasked with watching markets daily.
The entire college cost
When it comes to the entire college cost, parents should not think that it all has to be covered. There are federal, state and short term personal loans that can easily bridge the gap. Here is where a lot of parents get in trouble. They think that they need to cover 100% of the college fund and dip into their own retirement savings. Although college is important, experts caution parents to always focus on their retirement first. Though that may be contradictory to the nature of selfless parenting, in reality it is important to prioritize retirement. Anne Mayer, economist for Bankrate.com said, “People need to understand that there are tools for children to use to get through college that range from loans and scholarships to part-time jobs and grants. There are no such supplements for a shortfall in retirement savings.”
The 529 savings plan
The 529 savings plan is a great way to not only save for college, but also to find tax breaks. Qualified withdrawals are free of federal taxation and normal plans range from $100,000 to $270,000 per child. There are also minimum restrictions on the plans so you can start one regardless of how old the beneficiary is or how much you make.
It is possible to find ways to fund college, but it is necessary to plan ahead. If a parent has time, then stocks and investments can build savings to cover the cost. If a parent does not have enough time, then federal and state aid along with short term personal loans can meet the need. Either way, it is important for parents to save for retirement and then assess the need for children’s college funding. A good plan can reward a family with a carefree 4-year college education.