Saving for college

Saving for college is a scary think for most parents to tackle. Average tution cost over the last 10 years have increased 6.9% for public universities and 5.7% for private schools. The important thing is to start saving for college early. We started a mutual fund for our kids 12 years ago and even though the return of the fund was not that great (4%) we have been able to get a good start on saving for their education. Additionally we continued to contribute every month and also raised our monthly contributions over the years.

Fortunately it is becoming easier with the arrival of 529 plans and prepaid tuition plans. Several states offer prepaid college tuition plans. These programs allow you to pay for your childs tuition in advance either through a series of payment plans or a lump sum payment. The drawback to the prepaid plans is the tuition guarentee only applies to state colleges and universites. Some 250 private schools also offer theri own Independant 529 plans. The catch is the gains are capped at 2% per year if your child doesn't attend that school.

The 529 plan is another option to funding your child's college education. A 529 plan allows you to invest in a mutual fund and withdraw the fund to pay for college with paying taxes on the gains.