The proper utilization of monetary assets can provide great relief in future expenditures. In today’s world, insurance policies remain as the top choice among individuals who would like to secure any part of their future budget allocation most especially in the education segment. Based on the given scenario, a $100,000 worth of money asset is to be used for a specific educational plan from College 529 Savings Plan. In this aspect, the choice of a good policy is necessary to secure the maximum worth of the asset in future values.
As a personal choice, the New York 529 College Savings Program was selected. Primarily, this selection is brought upon by the idea to send my child to a university based on the state. With that in mind, it would just be reasonable to choose an educational plan which will have a direct correspondence on the location’s economic performance for optimum benefits. Add to that the fact that the policy is a direct savings type which earns interest equivalent to the length of investment frame.
Significantly, the Resident Rating for the plan involves a four out of five star rate based on customer satisfaction which probably makes it a good choice. As an additional supporting factor, the use of statistical data is also necessary. Based on the report from NY Times, college costs have already outpaced the inflation rate at 6. 6% in private schools last year, a pace more than double compared to the consumer price index (Glater, 2007). This equates to the fact that it is now very hard to come up with a financial capability for college more than ever.
In this scenario, it is much better to secure a savings plan to address the possible increase of costs of college education. Since the personal choice of education would be in New York, then most probably the local and national inflation rate can deliberately align with how much college education the state might have for the next 15 years or so. Most people will designate that inflation in the education sector spells difficulty but actually, if one is able to use the details in another perspective, a huge advantage can be experienced.
This is also the case in choosing New York for a 529 Plan since the location’s relative cost of living changes are on a negative rate in a greater part of the academic year (Kohli, 2008). This will provide more savings on the part of the students enrolled in the state’s universities as shown on the Figure 1 graph below which reflects the movement of some basic commodities. Figure 1 Another good point in choosing the New York 529 Plan is the fact that among the states in the area, New York ranks as one of the most expensive in terms of college education based on the 2006-2007 academic year report in Figure 2.
In that case, choosing a 529 Plan in the state can provide optimum worth for an invested savings policy. Figure 2 After realizing the external factors of selection, using the calculation based on the profit projection also accounted for making the decision in selecting NY 529 Savings Plan. Ideally, investing the whole amount of $100,000 should be sufficient enough to cover a child’s college education expenses after 15 years. However, the calculations provided by the website platform of NY 529 can be adjusted based on personal preference.
On a personal perspective, the relief of not having to pay monthly contributions is a prized benefit. With that principle, I have selected an amount which will give a zero dollar contribution according to a one time deposit procedure from the available asset. The breakdown factors allowed including only $82,700 of the initial available asset. This amount will cover the child’s college education in a New York university which is estimated to have a current cost of $25000 yearly.
The provided time frame from the initial deposit is 15 years which is estimated also to cover an increase rate of at least 6% based on the acquired data last year, and an expected earnings of 7% from yearly after-tax. Combining all of these factors, the projected value of expenses is $262,101. Technically, a little more than 80% of my $100,000 will already sustain a college education cost to grow up to more than $200,000 after 15 years, giving me earnings of 316. 92% with an extra allowance of $17,300 from the initial deposit.
The presented values are merely projections based on available trends. To make way for amore sound decision, economic variables should also be integrated at least as a form of forecasting measures. Right now, the aspect of a lurking economic recession in the US may gradually boost up the estimated 6% tuition increase rate within 15 years. Add to that the pre-conditions which will result from the general elections set to happen within the year. In any case, the NY 529 Savings Plan can still provide the best option in securing college education, making it the best choice for investment.
In summary, given all the factors of CPI, profit margin and other economic factors related to insurance performance, selecting New York’s 529 Plan could be one of the most efficient ways to use the present available assets.
References
Glater, J. 2007. College Costs Outpace Inflation Rate. The New York Times. Retrieved February 13, 2008 from http://www. nytimes. com/2007/10/23/education/23tuition. html. Kohli, M. 2007. New York-Northern New Jersey CPI Unchanged in December, Up 3. 7 Percent From a Year Ago. Bureau of Labor Statistics. Retrieved February 13, 2008 from http://www. bls. gov/ro2/cpinynj. htm.