Saving for college is no longer as simple as stashing money in a savings account, says Marcos Cordero, CEO of Saving for College LLC, which publishes the website Savingforcollege.com.
With dozens of state-sponsored 529 plans, which are tax-advantaged college savings accounts, as well as other investment vehicles to choose from, families may find it helpful to turn to innovative tools to guide them through the college savings process.
“Families planning to save for college would be wise to take advantage of the high-tech tools available to them, especially when it comes to 529 plans,” Cordero says. “These accounts are complex and can be overwhelming for those just starting to invest.”
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Mobile apps, “robo-advisors” and website tools can help parents and students make decisions about how much money to save and where they should put it. Here are several options for getting techy with college savings.
1. “Robo” investing: San Francisco-based FutureAdvisor unveiled its “Diplomas Without Debt” platform, a robo-advisor that aims to help investors with college savings, in May.
The free, online service takes into consideration a person’s state of residence, income, savings goals and other factors to make recommendations about which vehicles make sense for the investor. It will recommend not only 529 plans, but other education savings vehicles, too, such as Coverdell Education Savings Accounts or Uniform Transfers to Minors Act accounts, and then helps the client open the account and manage the investment.
[Take a quiz to determine if you’re a college savings plan expert.]
“As a parent trying to understand what accounts are available to you and what their purposes are and what are the contribution limits, all those things stack together, and for each individual person, the combination of tools available could be different,” says Megan Graf, client service and operations specialist at FutureAdvisor.
Caveat emptor: The company works specifically with Fidelity and TD Ameritrade and can only manage 529 accounts with those plan managers. Joe Fahr, FutureAdvisor’s vice president of marketing, says the software will let users know there may be potential tax advantages for choosing a plan in their home state, even if it’s not managed by Fidelity or TD Ameritrade, though it will also recommend a FutureAdvisor-managed plan.
2. Mobile apps: College savings apps vary from those that help students and parents predict college costs to those that teach children about spending and developing college goals.
In addition to the convenience factor, “apps can be helpful in the sense that they provide parents with budgets and goals, along with tools to help manage investments and add to college savings,” says Suzanne Shaffer, a Texas-based college coach for parents. “The best apps offer projected college costs and help parents plan accordingly.”
[Discover 10 tools that offer a tailored estimate of college costs.]
The College Ahead app by Sallie Mae is one example of the free college savings apps available. It estimates costs based on what type of college the student plans to attend, whether he or she plans to live on or off campus and what type of degree he or she is planning to earn. It also includes a college scorecard to keep track of potential schools and a FAFSA roadmap. The apps 4College!, by asset manager Legg Mason, and College Saving Wiz both estimate college costs to help develop a monthly savings plan.
There are others aimed at children. Big Start by Ascensus, which manages Indiana’s CollegeChoice 529 plan, is designed for children up to age 6. It allows the child to choose an avatar as part of an ebook and also includes activities about money and future career goals. Big Dreamers, for ages 7 to 12, and Max U, for children ages 13 to 18, also help with college planning.
3. College savings gift registries: Several sites allow college savers to set up Web pages so that friends, family — and even strangers — can help contribute to their college funds.
FutureAdvisor’s newest product, called FutureGift, allows college savers to set up free pages centered around events such as a baptism or a first birthday so that family and friends can donate to a college savings account rather than give a material gift.
“You can think of it as an enabling tool for friends and family to be involved in the savings process for college,” Graf says.
Givecollege.com offers a college savings gifting platform for a service fee. Prospective college students have been known to use general crowd-funding applications such as GoFundMe.
4. Online calculators and comparison tools: Savingforcollege.com showcases a college savings planner that can help determine how much a family should be saving each month to reach their college savings goal and lets them sort through the bevy of 529 plans using factors such as performance and fees.
In addition, Morningstar, the financial research firm, offers members a detailed plan analysis by state on its website, and College Savings Plans Network, a coalition of state plans, offers a calculator and a comparison tool on its website.
Trying to save for college? Get tips and more in the U.S. News College Savings 101 center.
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Discover High-Tech Tools That Help With College Savings originally appeared on usnews.com
