By: Sara Sindelar
Paying for college is one of the biggest expenses for an individual and their parents. In order for people to be able to afford to send their child off to college they need to start putting money aside earlier and earlier so that it can grow to the cost of tuition when the time comes. A CNN survey states that people save about 3.6% of their annual income for college even though they really need to save 5.7%. The percentage increased from 31% to 44% of those who are confident they will not reach their college savings goal. Times are getting tough with the economy and savings is declining fast.
There are many different ways to save for college with all the investment option available. The most popular method is the 529 plan. A CNN survey states that 43% of people saving for college are using a 529 plan. These 529 plans are state-sponsored programs set up with an asset management company. The individual sets up their account with the company; the income is tax-deferred and the money needs to be spend on educational purposes.
There are a variety of 529s so you have to do some research before picking one out. The key traits to look for are low fees, flexible investment options and diversified portfolios, good performance by fund, and tax benefits. There are so many other options to 529s and you should take these key traits in consideration when picking the option that best suits you especially in the tough times right now.