retirement, your only option may be rely- ing on your children to support you.” Compound interest can be your friend if
you’re looking at college costs ten years or more in the future. Use an online savings calculator to see the significant growth of small amounts over a long period of time. Also, your child’s age will impact your savings choices — the longer you have, the bolder you can be. If your child is in elementary school, you can consider riskier long-term investments that yield higher returns, such as stock mutual funds. Middle school means less risky, lower- return investments, such as short- and intermediate-term bonds and bond funds. By high school, all savings should rest in low-risk investments such as interest- earning money market funds. Families can take advantage of invest- ment and savings accounts designed specifically for higher education:
* 529 College Savings Plans: Con- tributions to these state-managed plans
often are tax-free and usually offer multiple options for investing. Learn more and view available plans by state by visiting
www.collegesavings.org.
* 529 Prepaid Tuition Account: If you know you want your child to go to a cer-
tain state or municipal school, this plan al- lows you to purchase tuition credits at that school at today’s prices. Annual college costs increase five to eight percent per year according to the College Board, so prepaying can save thousands of dollars.
* Coverdell Savings Account (also called an Education Savings Account
or ESA): You can open this account any time before your child turns 18 and contribute up to $2,000 each year. Ac- counts are offered by banks, credit unions, mutual fund companies and other financial institutions. Interest earned is tax-free and funds can be used to pay for elementary, secondary or college education costs. For more tips on saving for college, visit
www.smartaboutmoney.org.
You can obtain a name-brand degree without paying name- brand college bills
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