Mistake 3: Keeping money where it won’t earn enough
It may seem like a safe bet to keep college money stored in a savings account, for the years leading up to your child’s venture to higher education. Savings accounts can be highly reliable and safe but the downside is that they often provide a dismal return, in comparison to other savings options.
There are accounts specifically designed for college savings, and these often yield a far better return. Funds saved in a ScholarShare 529 plan yield a greater return and a greater tax-free growth rate, in comparison to a CD or a personal savings account. Tax-free growth rate is far less with a CD, and the return is significantly lower.
It’s increasingly important to prepare for your college savings plan. The average amount that Americans spent on higher education last year was $26,226 – an amount that can be a blow to any budget.
At Ambassador Advisors, we can present you with different option for college savings funds. We know that college can be a blow to your budget, but with the proper planning and a significant return on the investment, it’s possible to actually grow your finances.
Source: Journal of Financial Planning, FPAJournal.org “6 Steps Students Should Take Before Choosing a School” January 2020
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Potential investors of 529 plans may get more favorable tax benefits from 529 plans sponsored by their own state. Consult your tax professional for how 529 tax treatments and account fees would apply to your particular situation. To determine which college saving option is right for you, please consult your tax and accounting advisors. Neither APFS nor its affiliates or financial professionals provide tax, legal or accounting advice. Please carefully consider investment objectives, risks, charges, and expenses before investing. For this and other information about municipal fund securities, please obtain an offering statement and read it carefully before you invest. Investments in 529 college savings plans are neither FDIC insured nor guaranteed and may lose value.