Saving for College

How are you supposed to save such a huge sum in a down economy with increased costs of living and the need to save for retirement, too? Here, financial experts and college advisers offer eight tips to help you understand your options and meet the challenges of saving for college.

By Deirdre Wilson and Caroline Grannan

Economic turmoil and a nasty recession have rocked this country for two years now. And thousands of people – many of them parents trying to save for their kids’ college education – have lost jobs and investment income because of it.

In spite of the losses, which are finally starting to taper off, financial experts continue to urge families to put money aside, continue to invest and plan for their kids’ college education as early as possible.

How early? Dropping funds into a dedicated savings account even before your baby is born isn’t too soon, the experts say.

During the 2008-’09 school year, the average yearly cost (tuition, room and board) was about $14,300 for a four-year in-state public school and about $34,000 for a private university, according to the College Board, an association serving colleges, universities, students and families. But these fees can top $50,000 per year at some private universities. Multiply that by four years, or more.

How are you supposed to save such a huge sum in a down economy with increased costs of living and the need to save for retirement, too? Here, financial experts and college advisers offer eight tips to help you understand your options and meet the challenges of saving for college.

1. Start saving as early as you can.

If you start saving early on – even with small but regular deposits – compounded interest could make up as much as 25 percent of your college fund when the time comes to use it.

“Create a financial plan,” advises tax attorney Shannon Nash, author of For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your NetWorth (iUniverse Inc., 2005). Figure out how much you can put away each month for college savings, consult with a financial planner about savings plans, and re-evaluate your monthly expenses to figure out where you can turn “discretionary” spending into college savings.

2. Don’t take on “impossibly huge” savings goals.

Instead, plan on saving one-third of the college cost beforehand, advises Robert Franek, senior vice president/publisher at the Princeton Review, the well-known college advisory service.