Saving for College: How Do You Start?

Sending children to college can be very expensive. Fortunately, the sooner you start saving and investing for college, the more flexibility you'll have and the fewer loan payments you or your child will likely owe. In fact, if you start early and invest regularly, you may be able to save all the money you need to pay for your children's college education and never have to worry about loan payments at all.

College gets more expensive every year

For the 2007-2008 school year, the cost of college (including tuition, fees, books, room and board and other expenses) averaged a little over $17,000 at an in-state public university and about $35,400 at a private school.¹ Over time, college costs have risen about 6% per year on average. If this trend continues, by the time a newborn is ready to head off for four years of college he or she will need about $229,000 to attend an in-state public university for four years, and about $468,000 to attend a private school.¹

But don't let these figures scare you. While they may seem outrageous, remember that saving for college is like saving for retirement by starting early, investing regularly and contributing as much as you can afford, you give yourself the best chance to succeed.

And here's more good news: With today's tax-advantaged college savings accounts and tax credits, there's never been a better time to invest for your child's college education.

How much money will you need?

Just how much will it cost for your child to attend college? The table below shows what the average costs may be.

Projected cost of college

	Type of college
Your child begins college in	4 years public school (in-state)	4 years public school (out-of-state)	4 years private school
2 years	$90,300	$144,800	$184,200
4 years	$101,400	$162,700	$207,000
10 years	$143,800	$230,900	$293,700
14 years	$181,500	$291,600	$370,800
18 years	$229,100	$368,100	$468,100

Source: Annual Survey of Colleges, The College Board. Chart assumes a 6% average annual increase in tuition, fees, books, room and board, and other expenses.

Saving vs. financial aid

Do you really need to save so much money? Won't financial aid be available to help pay for college? It turns out you're almost always better off saving and investing as much as you can ahead of time, regardless of whether your child will be eligible for financial aid. Here are two reasons why:

• It's better to save today than pay off loans tomorrow. Many parents think of financial aid as free money for college. However, financial aid often comes in the form of loans, which must be repaid with interest.
• Your child may not qualify for significant amounts of financial aid. It's hard to know how much, if any, financial aid your child will be eligible to receive when he or she begins college, especially if you're planning far in advance.

Next: Strategies for successful saving

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