"Listen up, parents, would-be parents and grandparents who want to help: The best time to start saving for a child's college education is as soon as Mommy is pregnant. The best way to do it is as a family, with the children contributing what they can." This is great advice from Humberto Cruz, a national financial editor, but you may be among the millions of parents who have not started an education savings program yet. If so, this article is for you.

Children grow too fast and college is expensive
Imagine your child coming home with an acceptance letter from their "dream" college. The one that fits well with her aspirations. Only one thing could make you prouder — knowing you have done your homework and you're prepared to finance your portion of the bill. With the rising costs of education, planning and saving is now a family affair.

A TD Ameritrade survey found 62 percent of teenagers ages 14-19 reported saving for their college.

Remember to look at it as an investment, rather than an expense. According to the US Census Bureau, in the year 2007, the average male college graduate, ages 25-34, earned 58 percent more than the average male who completed only high school. Among women the same age, college graduates earned 78 percent more than non-graduates.

Establish a reasonable savings goal
Figure out how much to save by using college cost calculators on the Internet (try www.finaid.org). Also check tuition at a private university, a four-year public university and an Ivy League school. Then assume a 6 percent annual increase and a 6 percent investment return (most college savings plans use mutual funds). Remember, you don't have to save the entire cost of four years of college.

Invest tax-free
529 savings plans are state-sponsored investment programs that are given special tax status — the principal grows tax-def rred. Anyone can contribute to a 529 plan, regardless of income, and the contribution limits are high. A beneficiary (the person expected to attend college someday) is named. The money is withdrawn for educational expenses including books, tuition and other broadly defined costs and is exempt from tax. Depending upon the ages of the children in the family, one 529 plan may work for all. When one child has completed college, the beneficiary can be changed to the next child in line for school. The donor remains in control of the money.

Another option is a Coverdell Educational Savings Account. One can contribute up to $2,000 per year in a child's name. The money grows tax-deferred and is withdrawn tax-free when used for education, much like a 529 plan. However, if there is still money in the account at age 30 and it has not been rolled over to another child, a parent may have to hand it over to the child. In other words, the donor may lose control of the money.

Find someone to help pay
Scholarships and grants are ideal financial aid because they don't have to be paid back. Also, IRS tax credits for education can be up to $4,000 depending upon the income of the taxpayer. A Hope or Lifetime Learning credit from the IRS may help if your family qualifies. Some families do not allow their children to work during high school. Their "job" is to do well in school to earn a scholarship. Run the numbers — it makes sense.

Caution:

Don't spend your retirement money for your child's college. Your children will have more sources of money for college than you will have for your retirement. You don't want them taking care of you in your golden years.

Expert advice is critical, so meet with a professional to help steer you through the college-funding maze.

Registered Representative of Park Avenue Securities LLC. Securities products and services offered through PAS.
Financial Representative,The Guardian Life Insurance Company of America (Guardian), New York, NY.
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