My Empty Wallet: Saving For College Doesn’t Have to Make You Cry

While your wallet may be feeling a bit empty this time of year, now is the best time to start planning for college expenses.
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Back-to-school shopping. Check. Sports gear. Check. School registration. Check. Think you’ve finished writing checks for your kids’ school expenses? Let’s add one more item to your To-Do List—Saving for College! While your wallet may be feeling a bit empty this time of year, now is the best time to start planning for college expenses.

Time Value of Money: Time is on your side.

If you invest $25 a month, every month, from the month your child’s born until they’re 18 and that investment earns 10% interest, you’ll have saved $15,139 towards your child’s college expense. If you wait until your child is 10 before you think about saving, you’ll have to invest $228 each month to get to the same amount by their 18th birthday. Investing has more to do with how LONG you’ve been doing it than how MUCH you’ve invested. Over the last 80-some years, investing in stocks would return you an average of 10%* every year. This is where I insert a big * to warn you that averages are not absolute, markets are different, investing in stocks can be risky, ETC, ETC. Don’t cry. Don’t let the * scare you. Remember Ben Franklin’s adage “A Penny Saved is a Penny Earned” and start saving today.

The most common reason people don’t save is because they feel they can’t afford it. If you have a mountain of debt, you may be right. But, if you’re waiting until you have more income until you start saving, realize that incomes can go up and so can the cost of attending college. Start now.

How Much Do I Need to Save?

Think about the type of school, the living expenses and the number of years needed to graduate. You can find a calculator that helps at Don’t think you’ll be able to save enough? Sniff, sniff? Hope your child can qualify for Financial Aid? Let’s take the mystery out of how a Federal Aid package is determined:

Cost of Attendance (COA) – Expected Family Contribution (EFC) = Your Need

What is the EFC? This is the amount YOU are going to be asked to contribute to your child’s education cost—The amount you need to save. It’s different for each family. Check out for a calculator tool that helps you find your EFC.

How Do I Start?

So, you’ve decided to start saving for college—Congratulations! You’ve made the first big step. What’s next? Deciding how much to stash away is the easy part. Now, you need to choose from one of the many options for saving and investing. Each type of savings account has benefits and drawbacks. Most offer the benefit of tax-free gains on the amount invested. Here’s a short list of account types to consider:

* 529 Savings Plans

* Coverdell Education Savings Accounts

* Uniform Gift to Minors Act(UGMA) / Uniform Transfer to Minors Act (UTMA)

* Series I and Series EE Bonds

* Pre-paid tuition

* Roth IRAs

* Bank Savings Account

Try these links for more information on how to save, planning for college, and how to get into the school of your dreams. Put away the tissues--Give yourself an A and start saving today!

Princeton Review [Scholarships & Aid]

FinAid [Account types]

Calculators available at

*Average Stock Return

Editor’s Note: None of the sites referenced have paid or given consideration for their inclusion in this article. Opinions expressed here are that of the author and while we (TodaysMama) trust her, she manages our money after all, you should talk to a financial adviser before making any big monetary leap.


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