Saving money for college might be the last thing on your to-do list during these tough economic times. But, did you know that for the 10-years ended 2008, college costs rose more than twice as fast as general costs?  During the 2008-2009 school year, private college costs averaged $37,208 and a 4-year education at a public institution (tuition and fees) averaged over $30,000*.

However, higher education still has an advantage when it comes to life-long career earnings. College graduates earn anywhere from 58-78% more than non-graduates, which really adds up over many years of paid employment.

So, you understand the importance of post high-school education for your children and you’ve decided to make it a priority to start saving.  But, how much money should you save and where do you put it?

First, decide how much you can afford to set aside every month towards college savings.  Almost every financial expert will tell you that retirement savings is a higher priority than college. Why? Because there are many sources of funds available for post-secondary education, and the banks don’t offer loans for retirement.  So, look at your monthly money “buckets” and see what amount can be committed to education. In the beginning, it may only be a small amount. That’s ok – even a few dollars a month is better than nothing. The key is to “save early and save often”.

Then, decide what to do with the money. The good news is that there are lots of ways to save and tons of information about how to fund your child’s college dreams.  But, it can be overwhelming, and not every option available is right for your situation. You will need to do some research and maybe consult with a financial professional.

Here are some of the more popular ways to invest in your child’s future education and a few resources to learn more:

• State Savings Plans – Called “529’s” after the section of the IRS tax code that authorizes them, these are state-sponsored plans that have many advantages including tax-free growth, anyone can add contributions to the plan, and it’s transferable among family members. Most 529 plans can be opened with as little as $25. And, certain plans can be linked to a Upromise account where you earn rewards for eligible purchases on the things you buy every day like groceries, gasoline, online shopping, and more at over 40,000 participating retail stores and services. These rewards are then transferred to a 529 account where they grow tax-free.
  
  
• Education Savings Accounts (ESAs) – Also called the “Coverdell” ESA, these provide tax-deferred growth and tax-free withdrawals when the proceeds are used for qualified education expenses.  These accounts are flexible and can be used towards any level of education, not just college. There are some income restrictions for upper level income families.
  
  
• UGMAs & UTMAs - The Uniform Gifts for Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA) are similar and are a way for minor children to own securities (stocks, bonds, mutual funds, etc.) and allow college savings and wealth transfer to children and/or grandchildren. These do incur taxes at child’s rate after first $750, then at a normal tax rate.
  
  
• CDs (Certificate of Deposit) - The College Savings Bank offers 3 different college savings products. Each feature FDIC insurance, principal protection, and they are wrapped within several tax advantaged programs.

*General inflation figure based on the Consumer Price Index produced by the Bureau of Labor Statistics. College inflation figure based on the Independent College 500 Index produced by the College Entrance Examination Board.

Stacey Sherman is the owner of Family Life By Design, a company dedicated to coaching and training families and youth in the important life skills of Home & Family Management and Personal Finance. She is a Certified Family Manager Coach and Creative Wealth International Coach based in North Carolina.