College expenses have risen exponentially over the years, and 75% of Americans believe that is why many cannot attend college. Parents are constantly looking for ways to ensure children attend college without mounting debts, so it is essential to start saving early. A systematic investment plan is the best way to save for a child’s college education.
California-based wealth management firm Menlo Asset Management weighs the most popular funding options, 529 plans and life insurance, to assist a child’s college education. While both have pros and cons, it is essential to note that the most favorable choice depends on the individual family’s situation.
529 College Savings Plans
According to Menlo Asset Management, this is the most obvious choice to kick-start financing your child’s higher education. As a state-sponsored saving plan, it allows people an excellent opportunity to fund a college education, offering tax-deferred growth and tax-free distributions for education expenses.
Anyone can initiate this program on the child’s behalf, and it can be used beyond four-year schools at eligible graduate institutes. Funds in this plan can also be used to repay student debt and are transferable to family members. The downside is that it is accounted as an asset when you register for financial aid.
Universal Life Insurance
This plan is sought after sought-after college savings strategy allowing parents and students to pay for college tuition. It builds cash value through regular premiums. The policy has a high rate of growth, the lowest premiums depending on the age of the policy owner – and it is also transferable.
You can borrow against a Universal life insurance policy; however, that can reduce its cash value. Such a kind of policy also provides relief in case of any unfortunate incident that results in the child’s death. Age, health, and the type and amount of insurance acquired determine the cost and availability of life insurance. The policy is not counted as an asset when you apply for financial aid. However, costly fees are a considerable downside as large chunks of first-year premiums will be used to pay the insurance rep’s commission.
While both saving plans remain on the top of the list of long-term college funding plans, Menlo Asset Management provides a complete guide on other available options that could provide benefits, for instance, zero-coupon bonds, UTMA custodial accounts, mutual funds, etc. Providing a goal-based work approach, the firm is famous for delivering personalized financial planning and financial strategies to families and business clients.
Many clients benefit from Menlo’s prompt and intelligent investment and retirement planning by staying current on all legal and tax issues. If you are looking to save for your child’s education, speak to a financial expert at Menlo Asset Management.