Q: My son will be celebrating his first birthday next month. Do I really need to start saving now for his college education? How much of a difference will it really make? A: It is never too early to start saving for your son’s college education. If you save $20 a week from the time your son was born until he graduates from high school, you will save $27,000 at a 4 percent interest rate. If the savings is increased to $50 a week, you will save $68,000 over the same period of time. If you are able to save $2,000 annually starting from the age of one, you will have $80,893 by the time your son is 18 (with an 8 percent investment return annually). Even if you don’t start saving until your child is 7, you will have saved $40,991. Every dollar saved early will only decrease your son’s later dependence on loans, grants, or scholarships to pay for his education. While these options are used regularly by college students, they are not necessarily the best choices to pay for college. For example, the interest on loans will only increase the overall cost of the loan and lengthen the repayment timeframe. While grants and scholarships may sound nice, you cannot expect them to be a guaranteed part of your son’s college financial planning. Options such as the Coverdell Education Savings Account (CESA), 529 plans, or Upromise and LittleGrad college savings rebate programs simplify the process of saving for college. Talk with a financial planner about what type of college savings plan fits best with your family’s current finances and future plans.

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