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Home › Articles › Money Management › Financing College

Financing College

When to Start

By Felicia Hodges

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"[But] if the child is to begin college next year and you only have enough disposable income to fund the college bills as they come due, then it may be late to invest," adds Fine. "In this case, saving during college may work in your favor. You can use the savings after the child is out of college to repay the 'low interest' [student] loans."

 

How Much Is Enough?
With tuition today ranging from $10,000 to $25,000 a year and sometimes higher, college is one mighty expensive institution. As a result, if you plan to fund the whole thing without student loans, it may be hard to imagine saving $40,000 to $100,000 by the time your child graduates from high school, especially if there are no millionaires dangling from your family tree and no oil wells in your backyard. The key is to start sooner rather than later.

 

"If you start saving right when the child is born for an educational institution that costs $10,000 a year and earn 5 percent interest, the cost of savings would be $115 a month until age 18," says Allen Holmes, a CPA from California. "If you start at age 5, it would be $183 a month. At age 10, $340 and at age 15, $1,032 a month."

Starting early with compounding interest would be best, Holmes says, "But a lot of families wait, thinking they can make it up when their jobs pay more later in life. Can you really afford to take that chance? What would you do if something happened to one or both parents?" he asks.

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