Long-term financial planning is not a new way to pay for college for your children. Parents have worked hard to save and invest for their kids' futures over the past few decades. The government helps make laws that make it easier for parents to plan their finances. Up until now, the government has been improving the education system and making sure the laws are clear so that kids can get the right and safe education they deserve.
After years of working to make the financial planning system better, there are now several ways to save up the money needed to send kids to college.
Here are some options for how to pay for your kids to go to college and keep up with the rising cost of tuition at these schools.
Plans for prepaid tuition.
Prepaid-tuition plans may be one of the most popular ways to plan for long-term finances. It works like college-savings plans. It works by letting you save for college in a way that doesn't cost you taxes. Prepaid-tuition plans are based on how much college costs now, not how much you think it will cost when your kids are ready to go to college. So even if the cost of tuition doubles or triples by the time your kids go to college, you will still pay the same amount. Parents who want to play the game of stocks and bonds can get a pre-paid-tuition plan. So, plans that pay for college ahead of time can be a less risky investment.
Another good thing about prepaid-tuition plans is that the money goes to the parents instead of the kids.
But there are likely to be problems with every financial investment. Most prepaid-tuition plans don't cover other costs, like living in a dorm or paying for food and other necessities. There is also a chance that prepaid tuition plans will end before your kids go to college. This will cause you to lose the money you've been saving for a long time.
There are currently pre-paid tuition plans 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). Alaska, on the other hand, offers prepaid-tuition plans as a way to save for college.
- Bonds or stocks from a single company
A bond is a promise that you will get back the face value of the money you put into a company plus the fixed interest rate at a certain date. Stock is a way to show how much of a company you own. Getting money from stocks takes time and is risky. The stock's value on the market may go up or down over time. Even with big, stable companies, stock prices can go up and down in ways that are hard to predict. However, if you end up on the winning side, investing in stocks can be a very good idea. If you are the kind of parent who doesn't like to take risks, this is not the kind of investment you should be thinking about.
