How to Invest for Your Children's College
One of the biggest expenses you'll face is paying for your children's college. College is expensive enough if you have one child, but having more than one can be extraordinarily expensive. One way to help pay for your children's college is to invest smartly now so that you'll have the finances you need when they graduate high school.
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Instructions
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Choose an aggressive mutual fund, preferably one that shows consistent returns of 12 percent or more in interest. These will often produce the best long-term financial gains for your investment.
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Explore the possibility of a diverse portfolio. Something many parents should consider is spreading their investments over a large group of securities, including stocks, bonds, mutual funds and even forex (foreign exchange) trading. This is often the best way to earn enough income on your investment to cover a good chunk of the costs associated of college.
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Invest in the Coverdell Education Savings Account. While the accounts are limited to only $2,000 per year in tax-free contributions, over the long term, this can easily cover the cost of an education at many great colleges.
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Invest early, ideally as soon as your children are born, or even before. This gives your investments the benefit of long-term performance, which often has higher yields, even for low-risk investments like mutual funds or CDs (certificates of deposit).
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Invest in a 529 Education Savings Account, which, much like the Coverdell account, permits owners to invest in their children's education in a tax-free account. A 529 doesn't have a maximum contribution limit, which makes it easier for account holders to invest however much they want, whenever they want.
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Tips & Warnings
Find out if your employer offers college saving investment options as part of your benefits package. More and more employers across the country are offering employees the opportunity to take advantage of work-sponsored 529s and other types of savings accounts.
Be aware that many investment opportunities are risky, and while they can be very lucrative, there is also the possibility you will lose your entire investment.
Note that it is almost impossible to know how much money you will need for your children's education, so it may never be enough to simply invest. Student loans, scholarships and financial aid are all important considerations when considering your children's college costs.
