Which is the best college saving plan for kids?

Question

can anyone suggest me the best afordable plan that offers college savings for kids [ages 6 and 11] as well as good life insurance plan for their parents[ages 38 and 31] also combines mortgage protection in case of foreclosures or any serous illness? plsss.

Answer 1

OK, first define your needs.  Figure out how much you'll need for college in 7 years, and again in 12 years.  That's the college goal.

How long do you want life insurance for?  And do you want it to pay for college, also?  Figure out what you'll need, money wise, for the payout.  That's the life insurance goal.

Now, I don't believe in that mortgage protection thing.  Foreclosure insurance - PMI, won't ever cover YOU, won't prevent a foreclosure, and won't keep the lender from coming after you for any negative equity.   Mortgage protection - disability coverage - well, if you get disabled, likely you'll have more bills than just the MORTGAGE - I'd rather have a real disability policy, that pays, well, food, taxes, utilities, etc - not just the MORTGAGE (fat lot of good it does to have the mortgage paid, if you can't keep the lights on and EAT.)

So, now you want disability, life, and savings.  Now that you have the goals, you should probably pay a fee to sit down with a non-commissioned investment advisor, financial planner, etc, to select the tools which will get the job done cheapest, in your area.  

Going with someone who's trying to sell you insurance, will skew the opinion towards their product - you won't get unbiased information.

Answer 2

The Education Savings Account (ESA) a.k.a Educational IRA are very high yeild and the money you pull from them when your child is ready to go to college is tax-free... the last time I checked you could invest $2,000 per year, per child IF your household income is under $200,000 per year. The ESA's allow you to have the most control and can be invested anywhere, in any fund and you can change it at will.

If you want to go above and beyond an ESA or your income rules you out, look into a 529 plan.  They are state plans, BUT it doesn't matter which state you choose to go to school. (Ex. You save in a 529 in Kentucky but you can use the money in a New York School)  Stay away from "life phase" fund. You aren't in control of your money an administrator is and they have poor rates of return (8% on average which is only 1% higher than the average rate of tuition inflation).  Also stay away from a "fixed portfolio" plan.  They set a fixed percentage of your investment in mutual funds that lock you in until you need the money.  You can't move the funds either so if you get invested in awful funds, you're stuck.

The best 529 plan is a "flexible" plan.  You can move your investment around periodically within a certan family of funds.  With this 529 you can choose the type of fund, the amount in the fund, and you can move it around.  

Let's say your children each wanted to go to $30,000/yr schools.  That's $120,000 for 4 year college education per child.  Based on the ages you've given and our $30K/yr/child scenario you'll need to save appoximately $1200/mo. for the 11 yr old child and $500/mo. for the 6 yr old child.

As far as life insurance goes, stay away from whole life.  They try to use the "cash value" as a selling pitch BUT what they don't tell you is that the cash value you build up will not go to the beneficiary if the policy holder dies.  You lose that money!

Term insusurance may need to be renewed every 10, 15, 20, or 30 years (depending on your term length) so many people frown on it because of this BUT the premiums are low and you get the policy you paid for in the unfortunate event the policy holder dies.

Also, if you have enough life insurance, you do not need mortgage insurance.  As far as serious illness such as disability, just get disability insurance.

Hope this information helps!

Answer 3

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Answer 4

Very simple answer. A 529 plan, but...you don't have to purchase your own state's plan. Although you may lose the state tax deduction, it pays to shop and compare different state plans.

NY and NJ, in the past, have had solid programs.

Answer 5

I like the Coverdell Education Savings plan I have for my kids at Scottrade.