And if the public-school figures seem unsettling, you might find the figures on private schools downright terrifying: The costs at some of these institutions can also exceed $30,000--for one year alone.
But in light of these sums, it's also worth noting that the unemployment rate for those with only a high school diploma was 10.3% in 2010, while only 5.4% of bachelor's-degree holders were unemployed. So while saving for college may be a costly prospect, in the long term, it may still be worth it.
Here are four steps to starting a successful college savings fund:
Step 1: Start early
Compound interest is your friend, and the earlier you start making those savings account deposits, the better. Of course, savings accounts will only get you so far. There are many college-specific savings plans to consider, but more about that in a minute--the important part of this step is that regardless of your child's age, there is no time like the present to start saving for college.
Step 2: Choose the right savings vehicle
Beyond your basic savings account, there are a number of ways to save for college. While bonds are a traditional choice, a quick look at the current rates is likely to dissuade you. Similarly, today's CD interest rates and money market account rates are no match for specialized accounts created especially for college savings.
Section 529 Plans are among the more popular college-savings instruments. Every state offers a version of the 529, and they can be structured as either savings plans or prepaid tuition plans, in which parents purchase college credits at current prices for their children's future use. In addition, many private colleges offer a prepaid tuition plan known as the Independent 529 Plan.
Another common savings vehicle for college is the Coverdell Education Savings Account, also known as an Education IRA. The Coverdell account allows parents to earn interest without paying the usual taxes on it.
Since the available plans vary by state and each family has a unique tax situation, there is no one-size-fits-all approach to college savings. Making the right choice depends on selecting the right savings account--or combination of accounts--to ensure the greatest growth and minimize any tax implications. Consulting with a finance professional may be a wise move before you begin investing.
Step 3: Sign up for affinity programs
While depositing into a savings account is a very deliberate act, affinity programs offer a more incidental way of saving for college. They operate by depositing money into your child's college fund in exchange for tracking your habits as a consumer--information the companies later sell to marketers. Upromise is the largest such program. To participate, you link up your credit cards, utility accounts and grocery loyalty cards to your Upromise account and watch the money roll in with every eligible purchase. BabyMint is another popular affinity program.
Step 4: Spread the word
Did you ever think that Grandma and Grandpa might be willing to assist the saving effort too? Here's a way to avoid clutter and beef up the college fund in one fell swoop: Ask relatives to forgo bringing an armload of toys for the birthday party and make a donation to the college savings account instead. Many relatives are happy to oblige and will still bring a small, inexpensive gift to boot so your child will have something to open.
But why stop at just relatives? If you and your friends always exchange Christmas gifts, ask if they will make a small donation to your child's college fund instead. Your friends may actually be relieved that they don't need to scour the stores to find something that they haven't already given you in the last 20 years.
By following these steps, your college savings will begin to expand in no time. Then, when it is time for your child to head off to school, you can once again be their hero.
Source: http://www.foxbusiness.com/personal-finance/2011/10/20/4-steps-to-college-saving/
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