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Ways To Save Money For Higher Education : Savings Advice 

There are three important factors associated with the process of saving to provide financial support to students seeking higher education. The first factor that needs consideration here is the amount of money that can be saved.  The second factor is the length of time available to save and to grow your money.  Finally, the third factor is the investment vehicle or vehicles, which actually causes the asset to rise in value. 

Generally, it is less expensive to save for higher education than to borrow for that same purpose.  Payments on an education loan will usually be more expensive than periodic saving, to accumulate the equivalent amount of money prior to the student’s matriculation process.

Amount Of Money For Savings Purposes 

Of course, more is better when it comes to saving for education expenses. Obviously, parents are in the best position to plan for the education of their children, by setting aside money from the time that the future student is an infant.  Sometimes, financial support can be supplemented by the child’s earnings.  In addition, relatives, such as grandparents, or great grandparents, may have the means to contribute money for savings purposes.

Time for Saving and Growth

Time is particularly important.  The amount that needs to be contributed is less for those who begin the savings process early. 

Investment Savings Vehicles 

There are various techniques for savings for higher education.  Education investment options can include, but are not limited to, such savings plans as the following:

• 529 Plans
• Coverdell Education Savings Accounts
• UGMA or OTMA Savings
• Saving Bonds
• IRA Withdrawals 

It is up to you to be prudent, so  that you understand the advantages and disadvantages of these vehicles before money commitments are made.  Therefore, try to gain an understanding of all fees, potential taxable events, and tax penalties.  And, remember to check any existing tax benefits to you or your potential student.  When a decision has been made to use one of the savings plans, additional decisions will need to be made relative to the specific nature of the investment securities within which the money will be invested.

Reward Vs. Risk Implications For Savings 

With the decision to invest in securities, you will likely need to evaluate the potential risks and rewards inherent with the particular investment.  Generally speaking, the higher the risk, the higher the potential gain or loss will be.  Conversely, the lower the risk, the lower the potential gain or loss will be. 

You may want to employ the assistance of an independent financial planner, to help you through the investment planning process.

Savings Investment Liquidity 

You must bee certain that you understand the time commitment associated with any investment and what is involved when converting it back to cash.  So do not lock up your investment money for a time period longer than the point at which you will need to withdraw the amount.  

Tax Implications For Savings

You must understand that the tax advantages associated with higher education are available only if specific IRS guidelines are satisfied. 

Financial Aid Implications For Savings 

As a savings plan is developed, you need to know whether the accumulated assets are to be considered as an asset of the contributor or an asset of the student, when seeking financial aid.  When the student applies for financial aid, it is likely that it will be easier to qualify if assets are held in the name of someone other than the student.