This is often a popular question by many parents, and rightfully so. With tuition costs rising each year, it is understandably one of the number one thoughts that go through a parents mind. So, what should we do about it.
There are currently several different options for college savings: 529 Plans, Coverdale Savings, UTMA Account, or a basic investment account. Each option has its positives and negatives but the College 529 Plan is by far the most beneficial and productive way of saving for your child's education. You can open an account with as little as 50 dollars and choose various different mutual fund options. The money you invest goes in after-tax but grows tax free, and can be withdrawn tax free as long as it is used for approved college expenses. There are many different companies that offer these plans and if you want some suggestions shoot me an e-mail.
Despite the fact that I think these plans are very good, I don't necessarily think it is beneficial for every parent to invest in one. The reason I say this is because the number one concern of every adult should be retirement. With almost all companies offering just a 401k plan, and social security diminishing, the every day American must save for their own retirement. He/She cannot rely on a pension or the government to cut the paycheck when its time to call it quits. As a result, every adult should do the best they can to max out their retirement plans. This might mean not ever putting money aside for Juniors college savings plan. If you don't focus on your retirement plan, you might not ever retire or you might find yourself working at Walmart at age 75. Your son or daughter can always take out a student loan to fund his/her college education. You cannot take out a loan to fund your retirement. There are many low cost loans available to students as well as scholarships and grants. I am not saying a loan is the best source for college education funding, but it is certainly better than sacrificing your retirement income. I think your child would rather take our a student loan than have you move in with his/her family because you ran out of money.
In conclusion, I think that the 529 Savings Plan can be a good option for some situations. However, my advice would be to focus on your retirement first and then consider your college savings options. Go to my site for more detail: http://www.dollarstep.com
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