Paying for college is clearly one of the greatest financial challenges most families face. While it is never too early to start saving for your children’s college education, there are some costly mistakes to avoid along the way.For example, don’t make the mistake of saving for college at the expense of saving for retirement. By the time your kids are out of college, you’ll probably be in your mid 50’s or early 60’s.By that time it is too late to get started saving for retirement unless you are one of the fortunate few who doubles his salary late in life, or enjoys some other rere financial windfall.
The best strategy is before starting to save for college,calculate your financial objectives for retirement and set up a firm plan to reach those goals. That usually means contributing as much as possible to your company’s 401(K) retirement saving plan,as well as making annual contributions to an IRA account.I invest in Real Estate for my savings.
Once that plan is in place, you can begin saving for college. It may be that your income doesn’t permit you to save enough to cover the entire cost of college education. But with adequate retirement savings, you have the financial safty net to be able to comfortable borrow without worrying about whether you’ll be able to pay back the loan.
Remember that when your child begins to apply for financial aid for college, your retirement saving plans do not show up as part of your assets when aid adminisrators assess the family’s ability to pay for college.
Don’t Set Your Sights Too Low
One important mistake to avoid is thinking you don’t really need to save that much because you’ll send your kids to state schools instead of high priced Ivy League universites. What’s the point of pushing your kids to get straight A’s so they can qualify for admission to the country’s top schools when you’re unprepared to pay the price?
Special Investing Rules for Parents of College-Bound Kids
Stage 1 The Accumulation Stage.
Infant to age 14. In that stage, the number one objective is to do better than the typical 6%-7% annual inflation rate of college tuition.
Stage 2 The Preservation Stage. Age 14 to 18.In this period,you’re obviously getting closer to the big day when your child will be expected to start coming up with money to pay for college.
Stage 3. The Conservative Stage. Age 18 and older. Now that your son or daughter is actually in college, your main finacial cooncern is market risk. You don’t want to be holding too many stocks that could suffer if the stock market takes a sudden dip,you also need to watch your real estate holding as well. because you need to know the money you’ve worked so hard to save is really there to be spent. So cut your stock holdings from 50% of your total profolio to 20%.Increase your Real Estate holdings to 30% and keep the rest (50%) in your money market mutual fund.