We've been putting money away in our sons' college accounts their whole lives. Generous birthday and Hanukkah gifts from their grandparents in Illinois have helped their account balances grow and all their Bar Mitzvah presents were deposited as well. Still, with tuition, room and board at private universities now somewhere in the range of $55,000 a year, there are very few families who can simply write a check, no matter how frugal they've been, to cover those kinds of costs.
That's why it's amazing to listen to Family Finance Expert Ellie Kay.
"We have three that have already graduated, two that are currently in college and two that are headed towards college," Kay explains. "And we're putting them through debt-free on an average income, so it really can be done."
To save for college, Kay suggests parents open a 529 savings plan for each child. 529-dot-com explains how the plans work in different states.
"Basically, a 529 plan is a way to save for your kid's college that give you a tax-deferred savings plan," Kay explains. "One of the advantages is that anyone can set up a 529 plan for the child of your choice, so if you're a grandparent, or an aunt or a godparent, and you want to set this up for a child, then you then you c can actually go to 529.com, sign up for a plan and start to contribute money there. "
"There are different tax statuses and if you go to 529.com , you can see what the tax advantages are for your state," she says. "But there are some universally accepted advantages. For example, if you file singly you can contribute up to $13,000. If you file jointly, you can give up to $26,000 without incurring a gift tax."
She also suggests signing up for a Upromise account, which links to your credit cards.
"You can sign up for free membership, anyone can, and then when you're shopping in the grocery store, or getting gas, or even shopping online, there are hundreds of participating retailers that will actually deposit one percent to 25% of what you've spent back into your child's college education."
And she says students should get involved by searching SallieMae.com for scholarships.
"There are up to 1.9 million scholarships listed at that site," Kay explains. "Let them take five hours a week and do their due diligence in looking for scholarship money and you might be surprised. I found scholarships for skateboarding and knitting," Kay says.Her final advice is that parents should not risk their own homes or retirement funds to pay for their children's college, even if that means the kids have to work to help pay their own tuitions. "I don't think that parents should ever borrow on their own future in order to pay for their kids' college," she says. "It's important that we continue fund our retirement and not jeopardise that for our kids' college. It's better when they can own part of the process and you can put them through debt-free. Then everybody's happy. "
To get more of Ellie Kay's tips on family finance, click here.And if you're looking for a last-minute gift for a child this holiday season, you might want to consider setting up a College Savings Account, which will likely mean much more to their future than any toy or video game ever will. Read more Parenting Perspective blogs by visiting the Parenting Channel on 6abc.com.