When it comes to college savings, be aware that your family may qualify for financial aid, depending on your income. If financial aid is a possibility, you should try to minimize assets held in the student’s name. Thus, you probably should invest for college in your own name.
One option is to invest directly in stocks, bonds, or mutual funds. Investing in this manner will keep your financial options open; you’ll have access to the money if some emergency arises.
On the other hand, some people lack the necessary investment discipline to save for a child’s education. You may feel strongly that you need to set money aside in some sort of plan, in order to avoid tapping it. If so, a Section 529 college savings plan might be the answer.
In a Section 529 qualified tuition program, investment earnings won’t be taxed, under current law, if they’re spent on higher education expenses. Many 529 plans are treated as the account owner’s (the parent’s) asset, for financial aid purposes, so the impact on financial aid may be slight.
