A Parent’s College Savings List – Part 1

In this four part series of articles we will examine a checklist parents can use when saving for their student’s education years in advance of matriculation.

We will look at:

Investment Performance

• Asset Allocation
• Contribution and Investment Limits
• Eligibility
• Contribution and Investment Limits
• Distributions and Qualified Expenses
• Beneficiaries
• Tax and Financial Aid Implications
• Miscellaneous Items

It’s paramount to research college savings options carefully, just as you would research any investment opportunity. The following are a few of the many investment questions you should ask about each college savings option presented here:

Investment Performance

1. What are the fees? Is there an enrollment fee or sales charge? What are the annual expenses (management fees)? Is there a redemption fee or a back-end sales charge?
2. Is the return on investment guaranteed? If not, ask for historical return data, but remember that past performance is not necessarily indicative of future earnings. If the return is guaranteed, who is making the guarantee? Is it backed by the full faith and credit of the state, the federal government, the Federal Deposit Insurance Corporation (FDIC) or some other entity?
3. Does the plan offer an investment that has returns indexed to increases in tuition or inflation? Is the return based on actual tuition increases, state average increases, the increases at a specific school (e.g., the most expensive public college in the state), or a projected increase?
4. What is the historical return on investment? Is the plan likely to continue with a similar return on investment in the future?

Up Next: Part 2 Contribution Investment Limits & Eligibility