Finance Your Child’s Education – Stress Free

In 2002, the average annual cost for a public university was $9,338. It is estimated that by 2017, the average annual cost will be $19,413. And that’s just for tuition and credit fees. Let’s not forget about room and board, books, food, clothes and extra activities.

With those figures it mind, it would be wise to start planning for your child’s education today.

You already know about loans and scholarships but those aren’t the only options. You don’t have to go into debt! There are several choices to help you prepare for your child’s future.

529 Plans

A 529 or qualified tuition program is a (federal) tax-free investment plan that allows families to save for their childrens college educations.

Each state has its own 529 plan and you do not have to be a resident of a particular state to invest in that state’s plan.

The 2 types of plans include:

Prepaid Tuition Plans – These plans allow you to pay for your child’s in-state tuition at today’s prices. These accounts are low-risk and they are guaranteed to match or exceed in-state inflation. However, these plans are often limited to state residents and the cost may not be covered if your child decides to attend an in-state private university.

Education Savings Accounts- Or college savings plans are investment accounts whose value fluctuates with the market. They can be used at eligible public and private universities- there are no residency requirements. Additionally, some plans have high contribution limits per beneficiary and you can contribute up to $11,000 per year without paying a gift tax.

Savings Accounts

Even if your child only has a few years until it’s time to go to college, it’s never too late to begin saving. Determine where you can cut costs and put that money into a high-interest savings account.

For example, instead of buying 2 video games as a birthday present, buy one and put the extra money into a savings account. What about Christmas and Hanukkah? Sure, it’s fun to open presents but I guarantee that the novelty of those gifts will soon be forgotten and later on your child will thank you for making sure that their education was financed in a stress-free way.

Here is a tip: look for a FDIC insured bank that is based online. These banks offer higher interest rates because they don’t have the operating overhead of having branches. The work the same way as a regular bank except that there is no physical branch. You deposit money through your current checking account and receive monthly statements either via email or through the mail.

Finance – General Overview

Finance is a generally applied term for more than a couple of things. The term finance applies to the commercial activity of providing funds and capital; also it is that branch of economics that studies the management of money and other assets. If one were to round up the different definitions into one, finance can be defined as the management of funds and capitals required by a business activity.

Management of Finance
Management of finance has developed into a specialized branch within management since long ago. Managing finance involves dealing with optimizing allocation of funds to various activities either by borrowing or by mobilizing from internal resources. The word optimizing in finance may strike an odd note but it means taking intelligently structured steps at minimizing the cost of financing while simultaneously attempting to maximize the profits out of the employed finance.

Finance Governs Most of the Activities
A poor finance management will immediately show as deteriorating conditions in the procurement, production and sales as it touches all spheres of business activities. For this reason, a finance manager is expected to be very judicious in either mobilizing funds or allocating for expenses. Lee Iacocca, the most revered management guru, calls finance managers as ‘bean counters’ who look at the expense part with rather pessimistic view. Unlike the sales managers, who would like to invest in future by product development, finance managers are rather skeptic of financing a project whose benefits lie in the future. Finance management governs the future outcome too.

Finance in Small Business
For most small business owners there is not a clear distinction between personal finance and business finance often leading to cross utility of funds. Lenders, either future or present, don’t look at this with a soft corner. But resisting the tendency for such utilities may dampen ones zeal temporarily but sure brings the much needed discipline which is the foundation of all future progresses.

Financing a business can often be perilous if not approached with caution. Although bad management is commonly given as the reason businesses fail, inadequate or ill-timed financing comes a very close second. Whether you’re starting a business or expanding one, sufficient ready capital is essential. But it is not enough to simply have sufficient financing; knowledge and planning are required to manage it well. These qualities ensure that you will avoid common mistakes like securing the wrong type of financing, miscalculating the amount required, or underestimating the cost of borrowing money.

Financing
Small businesses can finance their needs from either internal resources, friends or from banks and private lenders. The less you finance from outside lenders the more it ignites the profitability. This is why, perhaps, Bob Hope famously said, “A bank is a place that will lend you money if you can prove that you don’t need it.”