This is the time of year that friends, extended family members and neighbors — and perhaps you as a parent — offer good wishes to a teen heading off to college for the first time. Cars are packed full with whatever will fit in a tiny dorm room or small apartment, and feelings of hope and promise abound.
I experienced that magical feeling when I headed off to college, and I look forward to watching my kids when they head off. In my current role as a financial advisor, I’m excited to hear stories from my clients who are experiencing this time of joy.
I enjoy seeing the fruits of my labor in the many ways that thoughtful planning and saving for college have benefited the families I work with. I believe a college education is one of the most precious gifts you can give to your children or grandchildren.
You are probably aware, however, that the cost of living is steadily increasing, and college costs are no different. In fact, college tuition and fees have increased at two-and-a-half times the inflation rate. Economists predict that the costs of attending a state college will soar to $120,000 in 2015.
Thankfully, many investment vehicles are available to help fund higher education. One of the most recognizable options is a 529 college savings plan. Officially known as a Qualified Tuition Plan, this tax-advantaged investment vehicle is designed to help families pay for college and graduate school expenses when they are needed in the future. The two types of 529 plans include a college savings plan and prepaid college tuition, and both are generally sponsored by state agencies.
Other investment vehicles to help save for college include Coverdell Education Savings Accounts, Zero Coupon Municipal Bonds, custodial accounts (Uniform Gift to Minors Act/Uniform Transfer to Minors Act), U.S. savings bonds, mutual funds, stocks, bonds and traditional savings accounts.
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Each vehicle has different tax implications, risk factors, investment options and cost considerations. Your financial advisor can provide you with information about your options and can help you decide which vehicles are most appropriate for you and your family.
Whatever savings path you choose, your child’s college education is an investment that will pay dividends for years to come.
Rob Rumley is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Atlanta. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.