Smart New Ways to Save for College

In this article:
529 Plans
Prepaid College Plans
Coverdell Education Savings Accounts
Other Savings Tools

There is no better financial investment parents can make towards their child's future than to plan for his or her college education.

Nationwide, the price tag of higher education is rising at an alarming pace. During 2005, the tuition of a four-year public college increased on average 7.1 percent for tuition and 6.2 percent for room and board, and is rising much faster than the national average for wages and most other expenses. According to the College Board, a nonprofit membership organization, the average cost for a year of college—including tuition, books, and transportation—is $15,566 for in-state public colleges and $32,070 for private colleges.

Even with these daunting statistics, there are many available options for parents as they plan and save for college. One of the most important opportunities for parents of babies and young children is time. Ira Langer, sales manager at New England Financial, advises, "Parents should start saving early so that they can be somewhat aggressive in their investment choices and provide themselves with a better opportunity to achieve higher returns." As with most financial plans, good investment strategies and time are the winning combination.

To estimate how much money you'll need to send your child to college and how much savings will be required either monthly or yearly, try an online college savings calculator such as the Saving for College website (www.savingforcollege.com). This calculator allows you to input key information and determine whether your savings will cover future college costs. Additionally, it has a tuition search feature that shows current annual costs at various colleges nationwide and allows you to print a customized report that summarizes the information for you.

The next step is to review educational plans that can help you maximize your savings and then choose the type of savings plan suitable for your family.