Saving For College

You may have a six month supply of diapers in the closet. You may have your baby's first shoes picked out, even laced and ready to go. You may have registered your unborn child for nursery school. But have you planned eighteen years into the future? Are you planning for college now? No, you don't have to start buying up S.A.T. study guides. But you may want to start saving money.

Four years at an in state public university will probably cost almost $100,000 by the time your baby moves into the dorms, and a private college or university may cost more than $200,000. Room, board, books, and late night pizza deliveries not included. Horrified? Well, relax.

Scholarships, financial aid, and student loans can help, and you have the opportunity now to save yourself a lot of stress over the course of the next two decades.

When you start saving for your child's college education way ahead of time, you give the money you put aside time to grow and accumulate. Start saving now. Invest aggressively, perhaps in a stock fund or a no-load mutual fund with low expenses.

You might also consider a Roth IRA or a Uniform Gift to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account, and adding an Education IRA to the mix. And review your investment decisions annually, investing less aggressively as that fateful first tuition bill creeps closer. Once your child is about to enter high school, you should move the money into less aggressive funds, like growth and income stock funds and bond funds.

By the time your child is staying up nights worrying about the S.A.T., or you are, you should be making their college fund accessible and safe by transferring it into a money market fund. Looking forward to it?

Your child won't be either, but you'll both be thrilled when the acceptance letters show up and when the post-graduation paychecks start coming in, allowing you to declare your baby financially independent. Raising a college fund like raising a child, takes time, and the rewards are in the process as much as the results. Start now.

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