Saving Money For College

It's never too early to start saving money for college expenses through gifts, part-time jobs, investments, and a savings plan.

College may seem a long way off when your children are still toddlers. But this is the perfect time to start a savings plan. Fifteen years of lead time may provide enough of a nest egg to cover four years of higher education expenses. Here are several ways to get started.

1. Suggest investments as holiday and birthday gifts. When grandparents or aunts and uncles ask what type of gift they should bring, ask for savings bonds or stock shares in companies that interest kids, like Coca Cola or Nokia, if they are teens. Since bonds mature slowly, your kids will reap the full benefit of their gifts when they reach college age. If you can get them to hold on to stock shares, these may divide with time and increase in value, or the kids may opt to buy additional shares with cash gifts. They could end up with a handy portfolio by the time they graduate from high school.

2. Insist that kids save part of their earnings from part-time jobs. Even a twelve-year-old babysitter can afford to put away ten percent for the future. Parents can help her open a savings account or invest the money in a kid-sized mutual fund. Visit online investment sites to learn more about these options. Later, teenagers who work full-time during their summer breaks from school or part-time during the school year should be advised to save a little more toward college, perhaps in the fifty percent range.

3. Teach your children about the value of money and its limitations, along with an introduction to bank or stock market investments, by showing them how these things work. Read the business section of the newspaper together, or subscribe to a business news magazine. Visit online sites, many of which are geared to young readers, to follow market trends. Some sites allow kids to "paper trade," that is, pretend to buy and sell stock in something of a fun manner, along the lines of money-based strategy games such as Monopoly or Life. Your children can have fun learning how to use money responsibly. They may want to invest part of their allowance in small-scale, safe investment accounts or mutual funds that can earn dividends toward college savings.

4. One of the most important things to emphasize to your kids is the value of a savings plan. Teach them the difference between short-term and long-term savings through a bank or a money market account. Take them to the bank and have them open individual accounts (with your authorization, of course) and fill out their own deposit slips as well as update the account register. Share their excitement as they watch their accounts grow with periodic deposits and interest accrual.

5. Set a good example. Establish and follow a family or personal savings account. Talk about it in neutral or positive ways to help kids learn from your experience. Let them accompany you to the bank or watch you calculate the amount that needs to be saved for a long-term goal, like a vacation. Also mention the importance of a college education so they will learn to value it for themselves.

A savings plan for college can head off tuition loans and replace lost scholarship opportunities if kids' grades or athletic ability are not significant enough to open campus doors. Start early and keep at it!

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