This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Creative Investments Battle Soaring Tuition

BOSTON ( MainStreet) -- A new school year is in full swing and, as anyone with a student off to college for the first time can attest, the expenses will be substantial and ever-increasing.

Hearing the war stories of their neighbors can trigger some understandable panic on the part of parents with young children. Saving for college is neither as simple, nor as effective, as it used to be. Unique strategies may be the only way to afford higher education.

As the cost of a college education keeps rising, simple savings accounts just don't cut it for tuition, room and board.

"It is the biggest expense our clients will incur, second to the purchase of their home," says Denis Horrigan, CFP, a partner at Connecticut Wealth Management, a firm offering financial planning and asset management through LPL Financial that actively manages more than $200 million in client assets.

Horrigan estimates that a family with three children may expect to find the cost of a private institution will cost upward of $800,000 before scholarships, grants or aid kick in.

Several challenges confront families, even if they start planning while their kids are young. A short time horizon escalates the pace of saving and makes down market cycles potentially devastating. The rising cost of secondary education also makes the savings goal a moving target.

Horrigan draws a comparison between saving for college and planning for retirement.

"When you are saving for retirement, what you are trying to do is grow your assets at a rate that's greater than the general inflation rate," he says. "Well, when the general inflation rate is 3% that's attainable. With the inflation rate of college education at about 6% a year, that becomes your hurdle. If you are putting money in a savings account earning 1%, you are going backwards. Your best option is to utilize some sort of investment vehicle."

Increasingly, new solutions are being offered to help families save for college.

Since the 1990s, states have offered 529 Plans, tax advantaged investments (the earnings grow tax deferred) that operate similar to how a 401(k) or IRA does. Each state has retained firms that manage an investable slate of funds. Investors are not limited by geography when choosing to establish a plan.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
BK $40.50 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
TSLA $206.79 0.00%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs