When saving for college what is the best plan or program to use?

The plan that has the best historical rate of return for the level of risk that you are comfortable with.

If your a parent trying to save for your kids then your best bet would probably to buy into an Index fund, Mutual Fund, or Exchange Trade Fund ( all of which you can learn more about on link) all of which tend to make on average between 8–12% annual return which is far better than anything a bank or Bond can offer especially since with a MF or Index your money will compound ( wont happen on a bond).

Quick Preview on Mutual Fund and Index: an Index (e.g. S&P 500) is a basket of stocks that try’s to track the market in general ( so as the economy gets better it generally does better) and a Mutual Fund is like investing into a company stock but the good thing is that the MF is a company that uses the money collected from stock to invest and you get a percentage from the proceeds. This is good because it’s a good way to be diversified without having to pick the stocks yourself.

Personally I like the Index or ETF because the fees are way lower than a Mutual Fund, but with a MF you do have the option to choose an MF that specializes in a sector you might like (e.g. Oil, if you think oil is gonna do better than the rest of the market).

I hope this helped. The key is to put money in early so it COMPOUNDS as that is the key to it all. Putting 10k now at 8% will leave you with more money in the end than putting 10k at 8% in within a span of 5yrs.

P.S. Just in case you are someone who doesn’t like the idea of having your chlid’s future tied to the Stock Market just remember not to worry because the worst is behind us and Equities have always done far better in the long run than any other source of investing and this will continue into the future. Also don’t try to day trade or anything else as you will be paying big time taxes and fees on everything.

There are also 529 plans. In Pennsylvania, there is a plan where you buy a “guaranteed” number of credits. No matter what the education inflation rate is, 4 credits purchased in 2009 = four credits in 2019.

I put “guaranteed” in quotes because it isn’t really guaranteed. THis year, due to poor performance, they are underfunded. So what they are doing is putting a surcharge on the credits already purchased. They sell the plan as a way to avoid risk, but there ain’t no such thing.

Any other investment has a level of risk. The stock market is one of the higher levels of risk. Historical returns are not quite as high as @MuffinMonarch would have you believe. The recent recession has changed that quite considerably. In any case, you have to remember and plan for the possibility of a significant downturn in stocks. They recently lost about 40% on average. You need to have a long time horizon to recover from that. Anyway, if you’d put 10K into a stock fund in 2007, it would be worth around 7K now.

If you’re saving for college, you don’t have that long a time horizon. About four years before your child enters college, you have to start switching investments from riskier investments like stocks to more stable ones like bonds or mutual funds. Otherwise you might suddenly find yourself forced to take money out of investments when they are worth less than what you put in in the first place.

The recent downturn in stocks it part of any business cycle. It happened in the 80’s and up until now everything was great. Most of the stocks that went bad for good companies was the result of economics. People has alot of stock on Margin ( meaning they borrowed money to buy the stock) and they went under their Maintenance Margin ( they amount of money a broker requires you to have in the portfolio before he lends you) so people had to sell off the only stocks other people wanted to pay off their debts (e.g. apple, google, etc), and since the supply was more than the demand the good company stocks failed.
History does not lie and the numbers I said earlier are true and most years (obviously not the past two) , the market is beginning to stabilize and being how your child is a baby you prob have between 15–20yrs before college.

Numbers: At 10% interest rate compounding on 10k Over the years ( average Hostorically for equities is from 8–12 so i’ll use 10)

If you invested 10k now at the above % than you will have :
15yrs 41,000
20yrs 67,275

Basic Time-Value of Money

School will surely be more than it is today due to inflation which is historically between 4–6% but either way you’ll be in good shape, anyone who knows stocks knows that those who are in it for the long run are the only winners (a.k.a Warren Buffet).

Speak to most any CFP or CFA or CPA and they will tell you what I just did.