Will You Be Able to Afford College for Your Child?

Some parents are so nervous about the future cost of a college education that they never start saving. Their reaction is understandable. Estimates for the price of a college education in 18 years don't so much inspire sticker shock as sticker near heart attack.

But experts say parents shouldn't worry about putting away enough to fully cover every college expense. Instead, shake off those doubts and just get your savings started. Cutting a few dollars out of your monthly budget, here and there, and investing can add up to an important contribution.

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"There's no more important time to start than when a child is young," says Joan Marshall, executive director of Maryland's college savings plan and chair of the College Savings Plan Network (CollegeSavings.org). "The younger a child is, the more time that gives them to save, and that reduces the amount they have to borrow later."

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Daphne Brogdon, who runs and blogs on CoolMom.com, says her family changed their spending habits in recent years to put away money for her three children's college educations. Occasional shopping trips to second hand stores to save money on school clothes helped their budget, as did consigning her maternity clothes. Brogdon also signed up for Upromise, a college savings program that puts a percentage of purchases into college savings.

"We're going to a financial planner," Brogdon says. "It's a good thing to defuse tensions to have a third party so someone can say, allocate money here. It's so emotional and hard to see the forest from the trees."

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Brogdon says the financial markets' swings hurt the money they'd saved for their older child, but they're taking advantage of the time they have to save for their younger children.

"The whole point is just to start," she says."Do it now. Just start."

Marshall encourages parents to take advantage of the 529 plans available in every state. The plans allow a tax deduction for contributions, grow tax-deferred, and are tax-free if used for college. Marshall also points to the psychological benefit of this sort of account. With a mutual fund, you can take money out of an account at any time. The financial incentives with a 529 plan act as a deterrent against taking the money out early for other purchases.

But if you're already paying for diapers, daycare, and still paying off your own college education, you may wonder where a monthly contribution is going to come from.

That's another common mistake, according to Marshall. Few people are sitting on an extra pile of money. Committing to automatic savings pays off in the long run for parents. Even $25 a month adds up. And if you're lucky enough to receive a bonus or another financial windfall, contribute then, too.

"When the market dropped, the people making automatic contributions generally stuck with it and were rewarded when the market turned up," she says. "But the people who wrote checks stopped writing checks and lost a year out of being able to save."

"I know parents of young children are especially financially strapped, but anything they do now is less they have to do later.

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