LO 8.2.2: Assess a client’s ability to meet the recommended education savings requirements. Flashcards
1
Q
What is the optimal educational funding method?
A
Drawing from one’s personal savings (or other dedicated education funds), particularly if the money is earmarked for college.
2
Q
What is are less optimal educational funding method?
A
- Pay as you go — using current income
- Is expensive because it fails to account for the time value of money.
- Relying on student loans, grants, or scholarships have some disadvantages; the availability of such money changes from year to year and, as a result, lacks predictability.
3
Q
What is the best pay to structure a savings plan to fund college expenses?
A
- By maintaining the funds in a manner that will maximize tax-deferral opportunities and
- Selecting investment vehicles to achieve the greatest possible return consistent with preservation of the funds.
4
Q
Why is good planning required for education funding?
A
- In many cases, parents will not have the money to invest or enough time for the assets to grow in a plan to pay for their child’s education in full.
- Many parents find that they must depend on a financial aid package to provide higher education funding for their children.
- Good planning requires a review of requirements at both the federal and the institutional level.
5
Q
Do private colleges have their own criteria for determining financial aid qualification?
A
Yes.
6
Q
What should any investment strategies employed by the family rely heavily on?
A
- The amount of time until the child will be enrolled in school.
- The time horizon is probably the most important factor (besides risk tolerance) to consider when deciding:
- what securities to invest in,
- how much to invest, and
- when to invest.
- The more time the child enrolls in school, the more options and time will be available for accumulation of principal and growth for a savings regiment fo the parents or family.
