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Financing College
When to Start By Felicia Hodges
"Any amount of money no matter how small saved today will have a greater value tomorrow," says Michael Darne, director of business development at Wiredscholar.com, a site produced by Sallie Mae for college-bound students, their parents and guidance counselors. "Investing just a few dollars a week from the time a child is born can grow significantly over 18 years. If you can't put away as much as you think you will need, don't give up. Something is better than nothing."
Investing can certainly help those few dollars turn into much more, but Darne says that one of the most important factors in determining which investment vehicle will best suit your needs depends on how aggressive you want to be, which can be determined by your child's age when you start investing. In other words, the younger the child when you begin, the more aggressive you can be. That's because, in theory, you have more time to recover from a loss if, for example, a risky high-yield bond investment doesn't pan out like you thought it would.
"It's ... important to think about the time-frame on the investment," Darne says. "If a family needs the money they'll invest relatively soon to pay for their child's education, the stock market may not be their best bet because the run the risk of the stock market dropping drastically. However, if the family started saving when the child was a baby, the stock market may provide the greatest return over time." He adds that families should consider their own personal financial situation, comfort level with investing and the length of time they have to invest before choosing how to invest their money and how much of it to invest.
