Money Matters: Family Finances

Saving Money for Your Kids’ Education: It’s Easier Than You Think

University tuition continues to climb across the nation, and it doesn’t seem to be getting better anytime soon. In fact, the average tuition at a four-year public university increased 15 percent between 2008 and 2010. The upside? It can be affordable, if you know what steps to take early on. Here’s what you need to know:

Start Early

The sooner you start, the better. You may think you don’t have enough to save, but saving very little early on is better than saving nothing at all, since the money will have more time to grow! Even just saving $50 or $100 a month will have a huge impact in time. Set up an automatic contribution to coincide with your paycheck, so you don’t even see the money. (It’s like it wasn’t even there.) You can ask your family to help too – instead of a huge present on their birthday, a small donation to the fund would help year after year. (C’mon, abuela will love to help out if she can!)

Go Public

Newsflash: private schools are expensive. Okay, you probably already knew that. So if you live in a good district with good schools, think about enrolling your kids in public school.

Know Your Options

One of the common mistakes many make is thinking savings plans are for the wealthy. False! Anyone can save. Think about it this way: when you save, you earn interest. When you borrow, you have to pay interest. And don’t let the risky stock market scare you. You can find an investment strategy that is low-risk.

So where can you put this money?

- You can open a Coverdell Education Savings Account, which allows you to invest up to $2,000 a year and withdraw money free from taxes if you use it for certain education expenses.

- You can also look into what’s known as a 529 Plan, which allows you to put away money for college and often invest it in mutual funds or other securities. Withdrawals are usually exempt from federal tax.

- With custodial accounts you can open an account in your child’s name and usually save on taxes. The two options here are the Uniform Gift to Minors Act (UMGA) and the Uniform Transfer to Minors Act (UTMA).

Missed the Boat?

If your child is practically packed for college and you haven’t been saving, don’t worry. Anything you can save now is better than nothing. Next, focus on scholarships. (Our favorite site is, which lists a ton of scholarships by amount, due date, qualifications, states and more.) Check out your loan options (public and private) and encourage your child to look into work-study or a part-time job. Paying for college can be done, you just have to be smart about it.

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