College should be considered a lifetime investment rather than a four-year expense. It requires financial planning and personal sacrifice. The earlier you start saving and investing, the less money you will have to save and invest later.

Furthermore, the earlier you start saving, the less risk you’ll have to take in your investment choices because long-term investing generally carries less risk.

There are many investment alternatives suitable for college savings. Here is a partial list of some such investments.

1. U.S. Savings Bond (a conservative investment strategy): Interest on EE Bonds is tied to yield on five-year Treasury Bonds and is adjusted every six months. Bonds are available for $24 and up with no fees or commissions on purchase or redemption. Income is exempt from all state and local taxes. Federal Income Tax can be deferred until bonds are redeemed.

2. Certificate of Deposit (a conservative investment strategy): CD’s offer a guaranteed rate of return, however there is a penalty for early withdrawal. Income earned from CD’s purchased in your name is taxed as ordinary income.

3. Corporate and Municipal Bonds (a conservative/moderate investment strategy): Fixed income investments pay a pre-determined interest periodically. Return of principle at maturity is impacted by market conditions.

4. Zero Coupon Bonds (a conservative/moderate/aggressive investment strategy): This type of bond is purchased at a discount from face value. There is no periodic interest payment and the yield is compounded for pay-out and maturity. The bondholder is taxed annually, as if interest were received.

5. Stripped Municipal Securities (a moderate/aggressive investment strategy): Mutual Bonds are sold in two parts—interest portion for investors seeking current income and principal portion for those seeking lump sum and potential for capital gains at maturity. Gains are usually tax exempt.

6. Common Stock (a moderate/aggressive investment strategy): Offers potential for capital appreciation and dividend yield. Sales commission is charged for purchase.

The longer you have until funds will be needed, the more aggressive you may invest. As college draws closer, your portfolio should reflect less risk and volatility.

Strategies for Success
Saving for college isn’t easy, but the earlier you start the better off you’ll be. For example, if you save $60 a month for seventeen years, earning 8% per year, you will have over $25,000 by the time money is needed for college.

There are several savings and investment strategies that can help you accrue money for college. Below are some saving ideas that may help you better prepare for the task of funding your children’s educations.

1. Assess your needs. In order to know how much to save, you need to estimate the future costs of tuitions at public and private institutions. With education costs rising an average of over 8% per year for a four year institution, you must save with inflation with mind.

2. Save early and often. The sooner you begin to set aside funds for college, the less you’ll have to save. Allow your investments to grow along with your child.

3. Set up a systematic savings plan. Try to save monthly or quarterly, just as you would if you were paying off a car or mortgage.

4. Keep a separate college account. The most popular are custodial accounts. These accounts ease the tax burden by allowing parents to shift some of their assets to the child at the child’s lower tax rate.

5. Involve the family. Children need to be aware of the family finances and accept responsibility when they are involved. It also becomes easier for you if the child is able to contribute to the fund. Create an incentive program with your child. Offer to match the money the child makes to his own account. They will value their education all the more.