Understand the realities. It’s critical to understand the overall higher education cost landscape – and how costs are likely to change in coming years. A good, comprehensive source of cost data is the College Board’s annual “Trends in College Pricing” report, which outlines current average costs for a wide range of institutions. One of the more useful insights you’ll glean is that costs vary widely – which can help build your confidence that, when the time is right, you’ll be able to readily identify schools within your budget that meet your student’s educational interests.
Get familiar with your saving options. There are more cost-efficient, tax friendly savings options for college than ever before. Not every option will work for every family, so it’s smart to familiarize yourself with each of them – including Coverdell accounts, UGMA/UTMA accounts, Section 529 college saving and pre-paid tuition plans and U.S. Savings Bonds, among other choices. 529 plans allow college savings to accumulate tax free and offer tax free withdrawals when plan assets are used for qualified education expenses. Many plans set fairly low minimums for initial as well as ongoing investment, making them particularly attractive for parents who start out saving relatively small amounts.
Start saving as soon as you can. Starting as early as you can makes the most sense – and gives your savings the greatest opportunity to grow. One problem that some parents have, however, is figuring out where to start. For some useful tips, you can consult our article “Lots of Ways to Get Started.”
Think about developing a formal plan – with professional guidance. There is lots of merit to having a formal plan, on paper, that lays out your college savings strategy and, just as important, describes how your plan will be synchronized with your saving and investing for your other critical life goals, like buying a home or retirement. Having a formal plan can go a long way toward helping you maintain the discipline of sticking to an ongoing savings regimen. Many families will find it extremely useful to tap the expertise of a financial advisor in developing such a plan, particularly in understanding and taking advantage of technical considerations such as tax efficiency (take a look at our article “Need a Financial Guidance Counselor?”).