Sunday, Jan. 06, 2008

Putting a little money aside toward college can mean a lot

A college education could cost upward of $125,000 by the time a diploma is in hand.

Barbara and Terry Adams knew they couldn't save that much for their three daughters, but the couple wanted to have something for their children. By scrimping between paychecks and setting aside birthday checks, the Adamses saved about $10,000 for each child to use after graduating high school.

"We thought it would be a good idea to do some preventative type of stuff by opening savings accounts," Barbara Adams said.

The Adamses make $50,000 to $75,000 a year.

While many parents don't have the means to save $100,000, financial planners suggest putting some money away regardless of the amount.

Parents have several choices, such as savings accounts and mutual funds, or 529 plans, Coverdell education savings accounts and U.S. savings bonds, which offer tax breaks.

For example, 529 plans are sponsored by a state or state agency and can be used to prepay tuition at today's prices. Contributions can be used for tuition, books and more at most two- and four-year colleges, vocational or technical schools nationwide, and foreign institutions. California's program is handled by ScholarShare.

Although some parents purposely don't save money, hoping they'll qualify for more state or federal financial aid, that strategy doesn't always work -- especially if a family's income is considered too high for government assistance.

Modesto financial planner Terry Swehla encourages his clients not only to save, but to start learning about college funding early.

"It's not just room and board and fees," said Swehla, a 20-year veteran of financial planning and the father of three college students. "Their sophomore year (of high school), search around, talk to financial aid people, find out how the system works. If you don't do that, you'll be lost."

Parents find it difficult to juggle mortgages, car payments and saving for retirement. Having to pay for college on top of that is something for which few prepare. Swehla said more people are looking to grandparents for help with college funding because their retirement budgets already are settled.

Modesto Junior College nursing student Jesse Diaz said his parents did not have enough money left over after living expenses to save for his college education. Even attending a community college takes money, he said.

"My parents encouraged good grades in school so I could apply for scholarships," said Diaz, who has opened savings accounts for his two children, ages 6 and 8. "You just need to do it. Start with something in their names."

Having the accounts gets Diaz's children excited about college, he said. When the tooth fairy leaves money, Diaz said, his children ask if they can put it in the bank.

The same happened with the Adamses. Their oldest daughter, Naomi, attended California State University, Stanislaus, for two years before transferring to CSU, Fresno, this fall to study speech pathology.

"A lot of the money that comes children's way over the years fritters away," said Barbara Adams about birthday and Christmas money. "By being aware of us putting money away, (Naomi) was aware she was working toward something -- 'I AM going to college.' "

Bee staff writer Michelle Hatfield can be reached at mhatfield@modbee.com or 578-2339.