Tax-advantaged savings vehicles have limitations on the amount you can save each year, whereas taxable accounts aren’t constrained by contribution limits. You don’t want to gamble with your child’s education, so you should generally choose investment vehicles that have risks with which you are comfortable. Remember that the more potential for growth offered by an investment, the more risk it may carry. If you start saving for college when your child is young, you have a longer time horizon and may choose to take a more aggressive approach to investing. If you have a shorter time frame, you may want to take a more conservative approach. Sample Asset Allocation Models These hypothetical portfolios are shown for illustrative purposes only. They are examples, not recommendations. Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss. Investments offering the potential for higher rates of return also involve a higher degree of risk. Other Savings Vehicles Stocks 75% Bonds 20% Bonds 50% Stocks 30% Cash alternatives 20% Cash alternatives 5% Aggressive allocation Conservative allocation College 10+ years away College 2+ years away
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