How To Choose Investments In Your College Savings Accounts
You’ve decided to start saving for your child or grandchild’s college education! First, you considered the type of account you wanted to use. If you’re still trying to decide please see some of our videos that may help uncover the details for all the options you have whether it be a Custodial Account, 529 Savings, or 529 Prepaid Tuition Plan.
Within the account you’ve chosen you can now select the investments that will grow the funds further. You have a couple of options available to you that we’ll discuss here to give you an idea of how to choose.
With this option you can select a fund or group of funds that target the date when your child will start school. For example, if your child is five years old today the investments may be more growth oriented and then as they near age eighteen the investments become more conservative, automatically. This is to preserve and make sure the funds will be there when they need to start college, protecting them from any downturn the market may face.
Manually Choosing Funds
This option allows you to select from a list of funds and set your own preference for how growth oriented you want your investments to be. Consider a family that has more than one child and they want to help all of their kids. They may choose to have all of the college funds be growth oriented because they want to have as much available for child two and three, not just preserving it for child one. They have enough funds invested that any downturn will only affect the child closest to school starting and the remaining funds can continue to grow for future years when their other children start.
It makes sense to evaluate a 529 by it’s investment choices. You want the funds you are saving to grow as much as possible to help afford the costs of college. Depending on the state you live in and the tax benefits, it could make sense to choose a different state’s plan to save for college.