Certified Financial Planner (CFP) Practice Exam 2025 - Free CFP Practice Questions and Study Guide

The correct answer highlights the significance of the time horizon when making decisions about securities for education funding goals. The time horizon is crucial because it influences how much risk an investor can effectively take on. If a child is younger and has many years before going to college, an investor can afford to choose more volatile investments that may offer higher returns over time. Conversely, as the child nears college, the investment strategy should become more conservative to protect the accumulated assets from market fluctuations.

Understanding this concept helps planners align investment choices with the specific timeline of when funds will be needed, ensuring adequate growth while safeguarding the principal amount leading up to the important milestones of education funding.

In the context of the other options, they don’t properly emphasize the necessary relationship that the time horizon has with investment decisions. While risk tolerance is an important consideration, it should be evaluated in conjunction with the time horizon, rather than being deemed less significant. Options that suggest increasing risk as a child approaches college or ignoring a child's age overlook the fundamental principle that a well-structured investment strategy must consider when funds will be required.