Remember that with the exception of the prepaid tuition plans, there are no guarantees that you’ll accumulate as much money as you need to pay for higher education, even if you start putting money away when your child is born. What you end up with depends on the amount you invest, the investments you make, and how those investments perform.
So why not just choose the prepaid plan? Experts advise you to consider the potential drawbacks as well as the advantages.
First, you are imposing some limits on your child’s choice of school. While that may not turn out to be a problem, it could lead to family tensions — not to mention potential penalties for changing your mind.
Perhaps more problematic is the fact that you are making an investment decision that imposes a limit on what you can earn. Your credits will never be worth more than the cost of tuition at the time your child enrolls, and there is always the possibility that you could earn more investing on your own.
