Tuesday, May 27, 2008

College Savings Myths - Busted by Fidelity

Fidelity Investor's Weekly provided insight into some pertinent college saving myths. Bottom line - saving for college is good!

  • Myth 1:Saving in a 529 plan will affect my child's eligibility to receive financial aid
    529 assets are associated with you and not your child. According to the federal financial aid formula, parent-owned assets are assessed at approximately 5%, compared with 20% of the child's assets.

  • Myth 2: I shouldn't risk investing my money in a college savings account when the market is so volatile
    Think dollar cost averaging and contribute regularly.

  • Myth 3 : I'll lose control over the assets in a 529 plan if my child decides not to attend college
    Assets can be used to fund a different childs education or your own.

  • Myth 4: 529 plans offer limited investment options
    A wide variety of investment choices are available. Check out the options

  • Myth 5: I don't have enough money to open a 529 plan
    Minimum requirements are $15 - $50.

  • Myth 6: I don't want to limit my child's college options by having to invest in my state-sponsored 529 plan
    Getting into a good school is a bigger challenge - the money will follow you.

  • Myth 7: The contribution limits of 529 plans won't allow me to save enough for college
    Contribution limits are $300K or more so this is a non-issue.

  • Myth 8: You can get a better return on your investments if you create your own portfolio of funds versus savings in a 529 plan
    Possible but keep in mind the other benefits (like tax reduction).
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