Save for College

For any new parent, college seems like a long way off. Many new parents are too busy thinking about their children's first steps than they are about how their children will afford college. However, in today's economy, it is important to plan ahead and ensure that children will be able to cover wholly or at least partially the cost of tuition. One of the ways to get an idea of how much to save is by filling out the Free Application For Student Aid, a standard government form required by all colleges when applying for financial aid or scholarships. This will give a rough estimate of how much of tuition will be covered by the family and how much you and your student will be expected to save for college.

A good rule of thumb is to expect that the college will offer about a third of tuition in scholarships and the student will be responsible for two thirds of tuition. Many colleges will offer student loads which have a very low interest rate, and sometimes no interest provided that the loans are paid off within a year of graduation. Many students are trying to avoid college debt altogether which is a prudent choice, and by planning ahead, parents can probably afford most if not all of their child's tuition. Most college experts also recommend saving over borrowing money. College can be a stressful time and graduating with a large amount of debt adds to the stress.

A recommended way to save up for tuition is by opening a mutual fund in the child's name and making monthly additions to the fund. Although the amount will vary, by adding 50 dollars each month, the investment would grow to around 25 thousand by the time the child graduated at 18. Mutual rates will vary, but opening one at six or seven percent is a reasonable number and will yield good returns.

A savings or mutual account earmarked for college is a great idea. Many parents, especially with more than one child, will want their children to take an active part in their future. By transferring the fund to their children at 15 or 16 and having their kids put money in the account, the parents will help their children to realize the cost of a college education as well as a better appreciation of a college degree.