Financial aid guide for students and parents

When you start saving money for college education, you will find it essential to spend less money and accumulate more on a weekly as well as daily basis. There are ample of options available to multiply the money as a part of financial planning for college. It is important to recognize the right alternative which could help you save thousands of dollars in long run. Following are the different college saving vehicles available -

• Savings Accounts: It is safer place to keep your emergency funds that you can spend in short span of time, as your principal amount will not vary. Insurance of up to $250,000 is provided by Federal Deposit Insurance Corporation (FDIC) for savings account. The funds kept in savings account are extremely secured and liquid. Drawback associated with the savings account saving is that the interest paid is even lesser than the inflation rate, so your funds are not able to grow in proportion to increase in college fees.

• Certificates of Deposit (CDs): These will help you in earning higher interest than bank saving accounts with extremely less risk. The principal amount kept in CDs will grow with time but this advantage also comes with a limitation on liquidity. You must agree to keep your funds for the time mentioned on scheme, which ranges from 3 months to 10 years. If you withdraw funds before your scheme gets matured then you might have to bear a penalty in the form of less interest rate payments.

• Mutual Funds: It is a pool of investment which is managed by professional and expert people. Mutual fund invests in diverse securities like stocks, gold, bonds, real estate and money market instruments. The biggest advantage associated with mutual fund is that your funds get invested in diversified products, which help you in fetching higher returns than any other financial instrument. However, it is not a risk-free investment tool and it doesn’t offer any guarantee returns on investment.

While selecting an appropriate saving vehicle, you must research and understand risk and returns associated with them. Time factor also plays a vital role in financial planning for college. So, it is essential that you must identify your short term as well as long term priorities and select an investment tool which will match your requirements.