College savings options abound for parents who start early

TUESDAY, DEC. 1, 2009

Q. How should couples with young children begin saving for college?

A. This is a great question. While it is never too late to start saving for college, those parents who start when their children are young have a powerful ally: time.

The first step is agreeing with your spouse on the goal you are saving for. Do you plan to pay for four years of college, two years of technical school, room and board, tuition only or something in between? Will your child be expected to contribute financial resources by working before, during or after their college years?

Having clearly written goals that detail how much you want to provide can help you estimate how much you will need to contribute to the goal over time.

And though it’s difficult to predict which college a young child will attend, it can be valuable to visit several college Web sites to get a better understanding of public and private costs. Focus on total costs, not just tuition.

Variables such as living expenses and meal plans can add significantly to the total; include them so you have a clear idea how much to save each month to reach your goal.

The good news is there are more investment options than ever to help parents and grandparents build resources to meet college costs. These include 529 Plans, Coverdale Education Savings Accounts, Uniform Trust for Minor Accounts and EE Savings Bonds. Each of these investments has varying tax benefits and restrictions on how the money can be used. Deciding which is best for you requires consideration of your time horizon, your personal level of comfort with risk, your income tax bracket and how much flexibility or control you want when it comes time to spend the money.

If this seems overwhelming, that’s understandable. But don’t panic or defer action. Do the research now and consider meeting with a professional who can help you develop a plan. Meantime, start saving, even if only $50 a month in a savings account.

Providing a college education for your child is the mountain you’re going to climb. The summit won’t get any lower if you wait.

Bruce Ellwein is a certified financial planner and member of the local Financial Planning Association chapter.

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