Did you know that September is National Alcohol and Drug Addiction Recovery Month? Well, it is. It's also National Head Lice Prevention Month. But perhaps of most interest to us financially minded Fools, it's College Savings Month -- so says the College Savings Plan Network (CSPN) of the National Association of State Treasurers.
If you haven't been worrying about saving for college yet, perhaps you should. Here are some scary words from the CSPN folks: "Experts estimate that by the year 2020 the average cost of a four-year private college could surpass a quarter of a million dollars. But even small annual contributions to a 529 college savings plan can add up. A family that invests $500 a year with a 7% rate of return can expect to have nearly $20,000 after those 18 years."
The CSPN offers many tips on how to sock away enough moolah to pay for Junior's education. Here are a few:
- The mortgage-refinancing wave has freed up previously allocated monthly funds. Put a portion of the savings toward college savings.
- As a child moves through life stages and their associated costs, don't pocket the savings on diapers, daycare, formula, etc. Rather, accumulate the former weekly diaper money and place it away in a savings plan.
- Immediately sock away money given to children as a gift before it's spent.
- Ask relatives and friends to contribute toward a savings plan rather than giving toys during holidays and birthdays.
- Direct deposit a portion of pay into a 529 plan.
- Use "found" money -- rebate checks, tax refunds, etc. -- toward college savings.
- Consider converting U.S. savings bonds to a 529 plan to receive better tax benefits and savings potential in the long term.
Another tip is, "Teach teenagers with paper routes or part-time jobs to contribute a certain percentage of their income to college savings, teaching them a valuable lesson on savings and accruing interest." To this, I'd add, send them to our Teens and Their Money nook, or give them a copy of our Motley Fool Investment Guide for Teens book. Nook or book, either can get your kid off on the right foot financially, setting them up for success in life.
You can get lots of tips on paying for college in our College Savings Center. Our Paying for College discussion board is a good place to ask questions you may have, and our book, The Motley Fool's Guide to Paying for School by Robert Brokamp, is also a handy resource.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.