6-14-07

Money for college:  My “how to”

We’ve all heard about how expensive college is and how it’s just going to get worse.  According to the College Board’s Trends in College Pricing 2006, tuition and fees at 4-year public institutions averages $5,836 and it’s $22,218 at 4-year private institutions. Those figures are going up about 6% a year.  I think I hurt myself trying to figure out what it will cost for my kids.  Frankly, the sheer enormity of the figures I came up with makes me wonder if I’ll ever get there.  And I’m sure the idea of a teenager coming up with even a portion of that is mind-boggling to them.

It strikes me that I don’t have to come up with all of the gazillions of dollars it will take to pay for my kids’ school.  What their mother and I have to do is lighten the financial burden on them as much as we can by saving as much money as possible, and educating them about saving for their own college.  Not pay for everything.

Parents, the cornerstone of any college savings strategy is your long-term savings.  You have both the obligation to plan for these expenses and the ability to do it over time.  Even a relatively small amount, set aside automatically and regularly can yield a decent sized account.  It’s up to you to decide how to, and then just do it.  Consult the experts here, but what I’ve heard about the so-called “529 plans” sounds very good.

Next, educate your kids both about what you’re doing to save for their college and about how they need to save also.  Early on, you can just talk to them about college and tell them you’re saving for their education.  Later, you’ll probably need to offer some sort of matching arrangement as an incentive to get them started.  Try something like “once you save $50 for college, we’ll match it” or “every time you have saved $100 in your college account, we’ll add $25 to it”.  Try anything to get them started.

Students, you need to set aside some of your hard-earned cash for this endeavor too.  Don’t feel like it’s just your parents’ responsibility to save for you.  Obviously, not as much as your folks, but something!  Maybe every other month put $10 in your college account, or even deposit $25 out of each paycheck. 

As college gets closer, you’ll need to get more serious about it too.  Start cutting back on entertainment expenses.  Slowly shift into “save every penny” mode.  Money you make the summer before college will go straight to this effort.  Remember, the more you save, the more you’ll have to spend at college. 

Two things though are certain.  You’ll have more resources available and realistic expectations about what is available if both parent and student work together and communicate.

Contact the College Answer Guy or submit questions for him to answer at lance@collegeanswerguy.com and visit his web sites at http://www.collegeanswerguy.com and http://collegeprep.okstate.edu.

Next week… Q and A.

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