FYI Magazine

National College Savings Month Reminds Parents, Loved Ones to Save Early and Often

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Setting goals is often the first step to achieving your hopes and dreams for yourself and your family. Making a plan, however, is crucial to making those dreams a reality. This is especially true when it comes to a college education for your children. Starting a college savings plan when your children are young sets you on a path for success and can help you reduce the need for expensive student loans down the road. Establishing a college savings

 plan early and contributing to it often is the key to reducing, or even eliminating, student loan debt. According to the Project on Student Loan Debt, the average student-loan debt increased 24 percent to $23,200 in 2008, up from $18,650 in 2004.

In an effort to raise awareness about the need to save for educational expenses, the College Savings Plan Network and more than 40 states recognize September as National College Savings Month, an important reminder to parents, grandparents, friends and family members that they can do do something about the amount of student loan debt their children acquire.

According to FinAid.org, parents who put aside just $50 per month from the time their child is born can grow a nest egg of more than $20,000 by the time that child turns 18, assuming a 7 percent return on investment. Increasing those contributions to $100 per month can yield more than $43,000.

While there are a number of college savings vehicles to choose from, savers should keep in mind that a 529 plan is a tax-free and, in some cases, state tax-deductible college savings option. Operated by a state or educational institution, a 529 plan is an education savings plan designed to provide families with an easy way to save. Most offer online enrollment with minimal initial investment, as low as $25. Additionally, contributions can be made by more than just a child's parents. Anyone can contribute to an account or open one on behalf of a child.

Many states offer a 529 plan and each state's plan is different. Morningstar, a leading provider of investment research, rates the various plans and is one of many resources to consult when selecting a 529 plan. Others include SavingForCollege.com and CollegeSavings.org.

An example of a top-rated Morningstar 529 plan is CollegeAdvantage, Ohio's college savings plan managed by Ohio Tuition Trust Authority. Account owners can contribute to a CollegeAdvantage account for as little as $25 and accounts are available to any U.S. resident. Investing just $25 per month in a CollegeAdvantage account with a 6 percent interest rate will result in nearly $9,000 in college savings after 18 years. CollegeAdvantage funds can be used at any college in the country to pay for tuition, fees, room and board as well as books. For more information about CollegeAdvantage, or to start saving with Ohio's 529 plan today, visit www.collegeadvantage.com.

"Saving with a 529 plan offers parents, friends and family members an affordable and attainable way to save for their loved one's future college expenses," said Richard Norman, interim executive director of Ohio Tuition Trust Authority. "With a minimal investment of $25, individuals can open a CollegeAdvantage account and begin saving immediately."