Broker Check

Financial Answer Center

Developing a Funding Strategy

How Is Investing for College Different from Other Investing?

It is not. Any investment program, for any purpose, needs to consider rate of return, risk, and when you will need the money. For college investing, when your child is young, you have a long-term investment horizon. When your child is 16 and getting close to going to school (you will need the money soon to pay tuition), you need to reduce your investment risk and move your investments to cash or other short-term investments.

This is not much different from saving for retirement—or saving for a house. The process is the same. What is your goal? How much do you have to work with? When will you need the money? Remember to always focus on when you will need the money; that will help you decide which investment vehicles to consider.

Develop a specific action plan for your college investment program. Remember to:

  1. Determine how much you need to invest or how much you can afford to invest on a monthly basis.
  2. Think about your willingness to invest in growth investments. This may be one good way to keep your investment rate of return ahead of inflation.

Whatever investment vehicle you select, invest regularly—monthly or quarterly. Most companies let you set up an automatic monthly investment program in which a fixed dollar amount is transferred from your bank account into the investment.

Share Article:
Add to GooglePlus