Question

Q4 (Level 1): Using the money parents saved for a child's college education is an example

of which of the three ways to fund education?
A Pre-funding
B Post-funding
C Funding from current income

Answer 1

Using parents' savings for a child's college education is an example of Pre-funding, which is saving money before the need arises to ensure funds are available when the child attends higher education. This approach can lessen future financial burdens and is a part of early college financial planning.

Step-by-step explanation:

Using the money parents saved for a child's college education is an example of Pre-funding. Pre-funding refers to saving money over time before the actual need arises, which, in this context, is the funding of college education. Families often start planning how to pay for college earlier by putting aside money in savings accounts, such as 529 plans or prepaid tuition plans, to ensure that funds are available when the child is ready for higher education.

Starting to save before reaching college is a responsible financial strategy that can lessen the burden of education costs. This proactive approach allows for investment growth over time, and potentially offers tax advantages, depending on the savings vehicle used. Furthermore, it diminishes the need to rely heavily on loans or current income, making it a cornerstone of personal financial planning for education costs.