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Most Parents Today Are Worried Sick About Paying For Their Children’s Higher Education. Are You One Of Them?

Find Out Why Your Child’s College Education Could End Up To be Your Largest Expenditure And The Steps You Must Take To Prevent Your Child’s Dreams And Aspirations From Turning Into Their Worst Nightmare!

Imagine for a moment your child coming home with a smile on the face and joy in the heart to tell you of an acceptance letter from a college. Just what your child wanted. A dream come true and the first step to a promising and financially rewarding future. A perfect match with your child’s career aspirations. Perhaps even your own choice.

Only one thing could make you prouder – knowing that you had put aside some funds for just this purpose. What if you were now told that the college fees and other related expenses had skyrocketed and what you have saved is far short of funds your child would really need? How would that change your perspective? Thousands of parents face this dilemma every year. Yet none have done their homework to be prepared for such an event.

On the other hand parents who have made the effort to do their homework are proud and confident that no matter where their child is accepted or what financial aid is offered, they have the resources to afford the college of choice.

Numerous surveys and studies have been published describing how parents prepare for future college costs. It doesn’t take much to know that

• Time flies and kids grow too fast.
• College fees are on an upward spiral
• The time to start saving and planning cannot be delayed

College tuition could be one of the largest expenditures you ever make. And, if you have more than one child, the financial commitment is even greater. The financial challenge you face is shared by millions of other parents.

Fortunately, families with a desire to save for future college expenses now have more options than ever before. Besides traditional investment options—savings accounts, taxable investment accounts, annuities you have powerful new investment options including Section 529 college savings programs and Coverdell education savings accounts.

New investment programs bring new opportunities, but they may make decisions more difficult for people who want the best education possible for the children in their lives.

Even if your goal seems overwhelming now, the proper planning and saving can put the cost of any college within your reach.

Most people look at the price of a college degree as an expense, like the electric or cable bill. But what if you looked at it as an investment? According to the U.S. Census Bureau, in the year 2006, the average male college graduate, aged 25-34, earned 77% more than the average male who completed only high school or had a General Education Development (GED) certificate. Among women the same age, college graduates earned 86% more than non-graduates.

Over a lifetime, the additional earnings resulting from this “investment” in education could easily exceed $1 million.
Still, the question remains - How will you finance that investment?

Pay as You Go

Many students today help pay for college by getting a job. The disadvantage here is that juggling studies and other college activities is not easy. Even a part-time job might detract from their primary focus – getting an education.

You can also plan to pay college expenses out of your future income as long as you realize that doing so might require substantial cutbacks in other areas of your family budget.

Borrowing to Pay

Borrowing to pay for college and simply repaying the debt with higher earnings after graduation is another option. Though many parents see advantages in having children contribute to their education expenses, a college education can be as costly as buying a home. How many parents want their children to start out with such substantial debt?

Scholarships and Grants

Scholarships and grants are the ideal financial aid. They don’t have to be paid back. However not everyone qualifies for these. Those that do qualify may find that the funds obtained fall way short of the actual costs.

Personal Savings

Personal saving now is the best way to ensure that you have options later. After all, you would like your child to select a college that offers the best education and not necessarily the best financial aid.

You have the peace of mind that you won’t be dependent on outside sources like loans or scholarships to meet college expenses.
Many strategies and investment vehicles are available to help you maximize your college savings. Selecting a suitable strategy and the best combination of investment vehicles is critical. For each option, the following key characteristics should be evaluated:

• The potential for growth
• Risk of loss
• Tax implications
• Ownership and control
• Ease of management
• Fees and expenses

The decisions you make now can have a significant impact on how much money is available for tuition payments in the future. In this tutorial, we focus on the most common components of a sound college savings plan – a plan that can give you and your future college student a high degree of financial security and the confidence that you can afford the college of choice.

Putting your plan together

There are many pieces in the college savings puzzle to devise a plan that fits every family. Your particular circumstances determine what’s best for you. However, following a simple strategy can get you started on a college education financial plan.

Establish a savings budget. One of the first steps you should take in planning for your child’s future college expenses is to establish a savings goal. You can get a rough idea of how much you should be saving every month just by finding out the average college fees and expenses in your area and projecting this to a future timeline based on the age of your child. As with saving for any goal, you will need to determine the cost of college, how much time you have to save and what kind of realistic return you can earn on the money you save. Keep in mind, the cost is not just for tuition. Factor in room and board, transportation, books and supplies, and miscellaneous expenses. A savings plan can then be established with a monthly savings goal from now through to college graduation.

Utilise Tax minimization strategies Your child can receive up to $900 in investment income without paying federal income tax (and at low tax rates above that amount as long as the “Kiddie Tax” doesn’t apply). By gifting income-generating assets into a UTMA account now, or gifting appreciated assets later, you can effectively shift income and capital gains out of your higher tax bracket. If you have a business the opportunities for tax savings may be even better if you can employ your child in the family business. Any assets gifted to your children are theirs to control when they reach a certain age under state law, and that a student’s assets and income are counted more heavily under financial aid formulas. Be sure to speak with your tax advisor before making any tax-related decisions.

Consider 529 savings programs and education savings accounts Just because your child is already in high school doesn’t mean you can’t benefit from tax-advantaged college plans. If your most recent Form 1040 shows income tax on interest, dividends, or capital gains distributions, you have the chance to save taxes with a 529 plan or ESA even if only for a few years. If your state offers a tax deduction for contributions to its 529 plan, you might even benefit by opening an account and soon thereafter start taking distributions to pay college bills.

Make tax-free investments If your child is planning to attend a private, religious elementary or secondary school, consider opening an ESA and contributing up to $2,000 per year. There may be no better way to invest tax-free. If your child still has money in the ESA after high school it can then be used tax-free for college.

Use your taxable and tax-free investments to create the right asset mix. If you maintain a fully taxable investment portfolio and a 529 plan or ESA, consider concentrating the growth portion of your investments in the taxable accounts and the income-producing portion in your 529 account or ESA. Growth stocks and low-turnover equity mutual funds are already tax-efficient and can take advantage of low capital gains rates, while income-producing investments are less tax-efficient and can benefit from the tax shelter of a 529 plan or ESA. Capital losses in a taxable investment can also provide a tax benefit, while a 529 plan or ESA cannot produce a capital loss (only a miscellaneous itemized deduction if fully liquidated).

Get professional assistance. Consult with experienced and knowledgeable financial, tax, and/or legal advisors before implementing your plan. The issues are complex. Be aware that for some financial advisors, 529 plans and ESAs are a new phenomenon. If you are working with one, ask which particular 529 plans are available through the advisor and what makes one 529 plan better than another. In interviewing prospective advisors you might even ask whether they have opened their own 529 accounts. It helps to know that the professional you are relying on has personal experience with 529 plans.

Teach Your Children About Finances

Your child can help minimize the cost of college by managing their finances wisely. Prepare a realistic budget with your children before they go off to college. Be clear about which expenses you will pay for and for which ones they will be responsible. Have your child track spending, and together, review the budget periodically.

Students must be especially careful with credit cards, which are marketed heavily on college campuses. Students frequently graduate with too much credit card debt, and in some cases are forced to quit school because of debt problems. Companies promise attractive prizes and premium gifts for students who sign up for their credit cards, but this can hurt your child's credit and lead to a slippery slope of negative spending habits.