In addition, your child may also be able to meet some of the costs of college by working during the school year or during the summer. Finally, some Federal, State, or other student financial aid may be available, including loans to you and to your child. You will also want to think about what kind of savings instrument to use or what kind of investment to make. By putting your money in some kind of savings instrument or investment, you can set aside small amounts of money regularly and the money will earn interest or dividends. Interest refers to the amount that your money earns when it is kept in a savings instrument.
Dividends are payments of part of a company's earnings to people who hold stock in the company.
Principal refers to the face value or the amount of money you place in the savings instrument on which the interest is earned. As the chart demonstrates, the amount varies depending on the interest rate you obtain and the number of years that you save. The higher the interest rate and the earlier you begin to save, the less you need to set aside each month. For example, if you start saving when your child is born, you will have 18 years to save. Remember, by starting to save early and by using instruments with higher interest rates, you can put aside smaller amounts.