Sending your child to college can be an expensive endeavor.

Sending your child to college can be an expensive endeavor. Avoid making mistakes that derail college savings plans. With a little foresight and preplanning, you can avoid making these common mistakes.

1 Postponing Saving for College

The time to think about saving for college is when your child is born, or even before. Many parents put off thinking about saving for college until their child reaches high school. This is too late and doesn’t provide enough time for investments to grow.

2 Failing to Understand and Research Investment Vehicles Specifically for College Savings

With preplanning and a little research, families have attractive options to save and invest for their children’s college expenses.
· The 529 College Savings Plan is a state sponsored plan that tax defers your investment as long as the money is used for college expenses. Contribution requirements are either a set amount per month, or up to a set annual limit. Investments consist of stocks and bonds that are redirected into more conservative investments as your child nears the beginning of college.
· The Coverdell Education Savings Account allows you to contribute a set amount per year, pre-tax. Earnings grow without being taxed. Income and filing eligibility requirements may apply. For information on these plans, check out the College Savings Plans Network Web site at www.collegesavings.com.

3 Failing to Address Your Own Retirement Investing First

Many financial professionals recommend that you max out all retirement investment options available to you – such as IRAs or employer sponsored 401(k) s – before investing for your child’s college education. The reasons? Other options exist for getting your child through college, such as loans, grants, and other financial aid programs. But there may be no other options for you if you retire and don’t have enough to live on.

4 Not Saving Enough for Your Child’s College Education, Even if You Do Start Early

As parents, it’s tempting to fall into the trap of overspending on your children for their immediate wants, and to get carried away with expenses for a new baby, for example. Try to make all financial decisions with both the short term and the long term in mind. Would the $500 spent on fancy baby toys be better invested for future college funds? What would that $500 be worth when college begins, and the toys are a distant memory?

5 Failing to Teach Your Child Responsible Money Habits

Teach your child early about fiscal responsibility and the value of money. With good fiscal sense instilled early, it may be easier for your child to understand the value of putting money away for future goals, such as college.

6 Opening a Savings Account in Your Child’s Name

If assets are in your child’s name, it may adversely affect the amount of financial aid that your child is eligible for. Income contributions from children and from parents are given different weights by financial aid grantors. Students are expected to contribute more than parents, since it is assumed that parents have many financial obligations. The solution here is to spend down the child’s account to zero. You’ll have a chance to receive more financial aid in upcoming years, when your child has less income to report. Or, avoid the problem from the beginning. Instead of setting up an account in your child’s name, save for college through the 529 plan or the Coverdell plan.

7 Failing to Research and Go After “Free Money” or Scholarships

Parents and children can uncover a lot of scholarship opportunities, if they are willing to spend the time to do the research and fill out applications. Money of this type may be available from corporations, from state or local governments, from community organizations, and from schools themselves. Check online Web sites such as www.collegeNET.com for information on potential scholarship opportunities.

8 Failing to be Realistic about Family Finances and Educational Needs

Does your child need to go to a college for $60,000 a year when she or he might get a good education for half the price or less? Discuss goals and expectations honestly as a family. What does your child want from a college education? What can your family realistically afford?

9 Dipping Into Retirement Savings to Pay for College for your Child

While it goes without saying that you need this money for your future, early withdrawal of retirement funds often carries penalties and may incur taxes that will hurt your financial situation even more.

10 Failing to Build Enough Room into College Savings for the Extras

Investing for college will likely involve more than the cost of college tuition. Depending upon the arrangement you work out with your child, you may need to plan for extra expenses such as dorm or apartment expenses, furniture, fun money, and plane tickets to come home on holidays or for the summer.