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Starting a College Fund for your Child – Savings or Investments?

By: , dated January 25th, 2013

The best way to pay for a child’s education is to start saving early on in the child’s life. By saving money in advance, you can stretch out the savings over many years and not have to shell out the majority of the costs, which you may not be able to afford, when the child reaches the university stage in his/her life. Saving money early is the best way to financially prepare for paying for a child’s college education later in their life. But the question is should you use traditional savings accounts that are safer or investment accounts which are not as safe but may generate higher yields?

When starting to save for your child’s education early, you need to pick a plan for to determine what your path is going to be. If you sit on the fence, you may not be able to save the necessary funds required for your child’s education. Put the money in traditional accounts or use high yield investments, or do both. No matter what you choose, planning is the essential step.

Should you choose a traditional savings account, be aware of what you are opening, especially if you have little or no financial experience. The principal of the account is the amount of money that you place in the account that will earn interest. Some savings accounts are federally insured, and those are very safe, but they also tend to have less attractive interest rates. Other savings accounts offer higher interest rates, but many of them are not insured, which makes them slightly riskier. If you choose to go with a traditional savings account, set aside a certain amount of money each month specifically for the child’s education. The earlier you start setting money aside the less you will have to pay each month in order to afford to send your child to college. This is truly like saving with minimal risks.

Should you choose investments as your strategy, there are several things to keep in mind. First, you must decide where you want to invest your money. In some cases, especially if you’re an inexperienced investor, it’s best to let someone else handle your investment strategy. Find a good advisor or broker right away. Whether you decide to go with stocks, bonds, mutual funds, or something else entirely, keep in mind that while the rates can be high, and the profit can sometimes be fast and easy, the risks are also quite high. You have to be concerned about market fluctuations, and you will certainly need the help of an experienced professional. It is important to remember that you’re dealing with your child’s future, and for many, that’s not something that you can put a price on.

No matter which savings vehicle you ultimately choose for your child’s college fund, do what’s right for your family, formulate a plan, and start early.

This article was brought to you by the InvestorGuide Staff Writers and Editors.

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One Response to “Starting a College Fund for your Child – Savings or Investments?”

  1. Vivian. N says:

    Thanks for the advice, it will be helpful.

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