Saving for College: Checking Out the Cost of College

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At its heart, this book is about successfully saving and investing money for future college costs, on one hand, and paying little or no tax, on the other. And if that were the beginning and end of the matter, you'd be looking at a fairly straightforward task, one in which, if you followed all the rules, you'd achieve the desired result at the end of the game.

Unfortunately, you don't live your life in a vacuum, and many forces impact your ability to save adequately, to achieve reasonable investment returns on your savings, and to limit the amount of income tax you'll pay on those investment returns. You're operating on a field that is rarely level and that shifts and shimmies through no fault of your own. As a result, you need to be aware of how large and small changes, whether they're a result of government policy, market forces, or changes in your family's projected college cost needs, will affect your savings programs. And you need to be prepared to move with those changes — to adjust your savings programs to account for these other factors.

At the end of the day, your success will depend not only on how often you make deposits into your college savings plans or how large the deposits are, but also on how well that money works for you. Your goal is not to achieve a large balance in one or more college savings accounts. Your goal is to watch your children begin their adult lives with good educations, marketable skills, and no college debt.

Whether or not you went to college (and regardless of who paid for your education, if you did), the joy of planning and saving for that event for your children, your grandchildren, or even yourself and your spouse has to be tempered somewhat by the uncertainty of the financial costs involved. That uncertainty is the exact amount of the eventual bill because, clearly, cost is going up, up, up, and never down. How can you possibly know how much to save if you can't figure out how much college will cost?

This section breaks down all the costs of education into their component pieces and compares different types of education. If you know that your prospective student plans to attend a prestigious medical school at the end of the rainbow, you need to plan accordingly. If, however, your budding student has a fascination with all things dead and tries to embalm the family pet before burial, you may be looking at a funeral services school, which certainly costs much less than medical school. The point is that you need to be realistic about your expectations and about the talents and desires of the prospective student before you jump into your savings program. You want to save enough, but saving far more than you need for college is pointless.

Because tuition is usually the largest cost for college, many people make the mistake of saving only for tuition. But other costs, such as housing, books, and supplies, can account for a large chunk of college expenses — a large enough chunk that you should include those costs in your savings plan.