And colleges still offer scholarships, loans and part-time jobs to students. They began saving as much as 15 percent of their combined income about 10 years ago, earmarking the funds for college and retirement. He'll do the same when the time comes to pay for a diploma for son Dan, 6. A family with young children has time on its side, financial planners say, and should put a high percentage of savings into common-stock mutual funds, which offer greater growth potential than less risky bonds. With plenty of saving ahead, Koss is keeping more than 50 percent of his assets in stocks.
Families can also set up investment accounts in children's names.
These tax savings may not sound like much, but they add up over time. What's more, colleges weighing applications for financial aid usually assume that a high percentage of a child's assets is available for college. Families counting on aid should therefore avoid putting too much money in their children's names or else take out the cash a couple of years before college, said Milton Eisenhardt, a consultant at College Money, a Marlton, N.J., firm that provides college-financing advice. What makes saving for college even tougher for parents is the fact they must also put aside money for their own retirement. There are also government-guaranteed loans and scholarships from companies, unions and community organizations.