It's hard to picture your baby all grown up and heading off to college. Then again, just a short while ago it was hard to imagine life with a baby. And when it comes to financial planning, now is actually the best time to think about saving for her higher education. Assuming tuition keeps rising the way it has, in 16 years a college diploma will cost $150,000 to $300,000.
"Those are some pretty depressing numbers," says Karen Schaeffer, a financial planner outside of Washington, D.C. and chairman of the Certified Financial Planner Board of Standards. The good news? "Your savings won't have to cover it all. There will be other options." Daunting as saving may seem, your best bet, Schaeffer says, is to give it the ol' college try: "Save as much as you can, and start now."
Time is on your side. You have many years to save and see your money grow in the stock market and to ride out its sometimes turbulent short-term ups and downs. With some smart investing, you can be ready for the tuition bills with a sizable chunk of cash in hand and a smart strategy for where to get the rest. Plus, some pretty generous tax incentives can help your savings grow tax free -- and you may even be able to deduct contributions to your tuition account. Here's a roundup of the pros and cons of the various college savings choices. Don't worry, there won't be a test later -- unless you count when your daughter asks to move into the sorority house.