Time to Save for College Fees Starts When Child Is Born

Going to college is an expensive proposition that parents apparently can’t start thinking about too soon: If you begin saving $200 a month the day your child is born, you may end up with enough to send him or her to college.

Tuition and fees for a private university are now often $10,000 per year or more, and if room and board is required it can be an additional $5,000 annually.

Of course, given a rate of inflation of 6% annually, by 2009 that $10,000 annual tuition may look a lot more like $28,000.

“My general experience is that people don’t save for college,” said Steven Kafoure, a Rancho Bernardo tax preparer. “Or, if they do save, they don’t save nearly enough. Most people end up paying for their children’s college education out of their cash flow, borrowing against their house, or hoping for a scholarship.”

Although any amount saved regularly will add up over time and be of help when college bills come due, Kafoure offers $200 a month as a general rule of thumb.

Savings of $200 a month--$2,400 a year--earning 8% compounding interest for 18 years, will give you about $96,000.

If the mere thought of having to save $200 a month for 18 years turns your legs to jelly, don’t panic.

“Kids can work, too. If they work summers when they can, they can make a significant contribution,” said Kafoure. “Also, if you’re used to saving, you can continue to use that amount for tuition and expenses after your son or daughter begins college.”

Among the ways to save for college education:

* Series EE Bonds. After the bonds mature, if they’re used for tuition, some or all of the interest is tax free. Especially recommended for households with income of $60,000 or less.

* A Uniform Gift to Minor Account--a UGMA. The first $500 of interest every year is tax free, and other tax benefits may accrue.

* Stock. Some investors chose growth stock portfolios with long term investments in utilities or blue chip stocks.

Kafoure recommends keeping money you put away for college separate from your other savings--especially don’t make the mistake of mixing it with your retirement savings, which could be permanently diminished.