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Home › Articles › Education › College Countdown

College Countdown

Start Saving for College When Your Child is Born

By Deborah Ng

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Dan Verbus of Abingdon, Md., likes the flexibility of the custodial account. "We put some money from every paycheck in a jar in the house and every few months take it to the bank," he says. "We have separate accounts set up for each of our kids." It may not be as much as those who are contributing thousands of dollars to other college savings plans, but it's something.

What about the parents who haven't opened a college savings plan or who don't have thousands of dollars to invest in one? Will their children be able to attend college? There are still options:

  • Parents can take out a home equity or other loan to help with tuition and other expenditures.
  • Teenagers can be encouraged to take summer or weekend jobs to help pitch in.
  • Children should be taught good study habits early so they can apply for scholarships and grants to help defray the costs.
  • Consider sending the child to a community or technical college, at least for the first two years. These schools are more affordable.

If you're interested in opening a college savings plan for your child, your best bet is to seek the advice of a financial planner or advisor. Your advisor will help you find the best plan to suit your financial situation. Make sure you learn all the benefits and risks of each plan before signing up for anything. When it comes to your child's education, you can't start saving too early.

Note: Tax information is based on the Economic Growth and Tax Relief Act of 2001and is effective through December 31, 2010, unless extended. This information is general, not specific to any one investor, and you should always consult a tax advisor before making any investment.

Saving Early, but at What Cost?

We all want to make sure our children are provided for; this includes setting aside money for their college education. In our quest to give them a better life than we've had, are we losing sight of the big picture? Are we neglecting our retirement funds in favor of a higher education?

Consider this: many parents today are having children when they're in their 30s and 40s. This means they'll be approaching retirement around the same time their kids are packing up to go away to college. Which expense requires more attention?

Eddie Vallee of Phoenix, Ariz., feels that, perhaps, children can share in providing for their own education. "I have mixed feelings [about] socking away money for college," he says. "I do want to make it as easy as possible for my kids to obtain an education, but it seems that, these days, I see a lot doom and gloom marketing for college planning. The bottom line is that this is just not the case! In this day and age, (and in the future) anyone can take advantage of programs to fund their own college education, through loans, grants and scholarships."

Vallee has a point. Parents and children have always found a way to pay for school if it's their heart's desire, whether it's through a loan, an after school job or academic reward. "I think it's important for parents to make sure they are taking care of themselves before they take care of college funding for their children," says Vallee, who does have a fund in place to help offset the cost of education. It won't completely fund college costs, however. "It's going to be very easy for my kids to obtain the money needed when they decide to go to college. I don't think it's right for the wife and me to spend our golden years 'in need' while my kids party it up at Arizona State."


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