What is the best college savings plan?

9th Nov 2009 by Michael Haltman

A light hearted answer would be that any savings plan is the best. In this day and age of economic hardship, it is very difficult to add college savings into the budget. I can tell you though, with one of my kids a sophomore in college and one about to become a freshman, saving is critical. An extremely popular plan the the 529 plan which is offered by many private institutions as well as by individual states.

There is generally a cap in terms of how much can be invested over the life of the plan, but it is a relatively large amount. It is managed in a way that lowers the risk as a child gets closer to college. This is accomplished by lowering the portion of stocks and raising that of bonds. Parents will typically get a tax deduction for the amount put into the program in a given year up to a certain amount, and grandparents can invest as well.

For my kids I took a different route many years ago by buying municipal zero coupon bonds that mature during their college years. No upside, but I know how much I will have.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com