Filling up the piggy bank

The ideal time to start saving and planning for your child's education
is of course as soon as possible, but perhaps you didn't have the
forethought to open a 529 plan on the day your child was born. The
important thing is to evaluate your financial situation based on the
number of years you have until your child begins college and to make
decisions accordingly.

Maybe you have a teen who is planning to start college in just a
couple of years. Or perhaps you've been saving for a while and want
to know how your strategy should change as your child gets older.

Whether you've saved a lot or a little, your approach should be guided
by how many years you have left before your child is off to college.
Click on the year you think your child will begin college to read the
advice of Carson Booras, a certified financial planner of the
Schaumburg, Ill. branch of Charles Schwab.

2010

Your child is about 16 years old

If you've been saving for a while, now is the time assess how well
you've done, Booras says. Get in touch with the financial aid offices
of schools that may interest your child to discuss your eligibility
for aid. Use calculators provided by the government to determine your
expected family contribution. Now is the time to start applying for
scholarships, something that is "often overlooked," according to
Booras.

Booras describes these last couple of years as "the 9th inning," a
time to "get serious" and "look for ways to be more conservative." If
you're working with a 529 plan, you can adjust how aggressively the
money is invested. Consider moving riskier investments into bank
certificates of deposit or money market accounts.

If you haven't started saving, you still have some options. Booras
recommends bank CDs or money market accounts as "very safe
investments." The money in these accounts is accessible and a parent
will be "achieving a decent result for the goal at hand."

Throughout these years parents should be communicating with their
nearly adult children about college costs and contribution
expectations, Booras says.

2014

Your child is about 12 years old

If you've been saving for a while, this is a good time to re-evaluate
your situation. Life events like a new job or a pay raise are a
signal, Booras says, that it's time to increase your monthly
contributions. If you aren't using an age-based approach to your 529
plan investments, now is the time to start. It's a good time to check
in to make sure you're not invested too aggressively in riskier
assets, such as small-cap stocks, Booras says. Keep in contact with
your financial adviser and don't neglect your own retirement.

Involving kids in the process and using planning for college to teach
them investment skills is a tenet of the Schwab approach, says Booras.
This is a great opportunity to "get kids a little bit up to speed
about investing," he says. Explain to them that "here's what we're
planning to do for you…if you work hard" and encourage them to
contribute their own money.

If you haven't started saving, Booras says "it's never too late to get
started." 529 plans are effective specifically because they allow
parents to contribute large sums tax-free, making it easier to catch
up. It's also important to remember that you're saving for four years
of college, Booras says. So you have more time than you think to save
for those second, third and fourth years.

2020

Your child is 6 years old or younger

Now is the ideal time to get started. Booras emphasizes choosing a
plan you can stick with, especially something with automatic
investment so you "don't have to stop your life" to write a check. At
this point, Booras says your goals would be geared toward more
long-term growth.

The two savings devices that Booras recommends are the general
custodial account and the 529 plan.

While a custodial account is the most flexible because funds in that
account can be used for cars, clothes or any other needs that may come
up, the 529 plan has the most advantages, according to Booras. It
was specially created to improve upon the traditional educational
savings account, which had a contribution limit of $2,000 a year. 529
plans allow for larger contributions, "to stay in sync with today's
high college prices." Distributions from 529s that are used for
tuition, fees, books, supplies, or room and board are all federally
tax exempt.

A combination of both might be the best move for many families, Booras says.