3 Rules for College Savings:
1. Start early. When your child is 5, start saving $100/month for 13 years. With 8% annual return, that’s $27,000. Waiting until the child is 12 requires investing $240/month over seven years to get the same amount.
2. Invest often. Commit now to set aside $5, $50 or $250/month. Or have it withdrawn from your paycheck. Send refunds, rebates, loose change to the fund. Ask relatives to contribute to the college fund instead of buying toys.
3. Don’t wait. Earmarking even $25 makes a difference. Telling your kids will inspire them. Ask them to help and drop a dime in their college jar for every dollar they get. It will teach them to work towards a goal.
Will saving now cut my child’s financial aid later?
A little for some, but you’re still better off having money than not, just as you’re better off earning wages than not, despite income taxes. Using today’s aid formulas, a low- or medium-income family could lose up to $5 in aid for every $100 extra they saved in any of these tools. But higher-income families probably won’t qualify for need-based aid anyway.