Perhaps the most important point is that it is never too early to start saving. You don't want to start thinking about putting money aside if your child is a senior in high school. Putting a little aside can go a long way later. "It's like retirement, the earlier you start the more you have at the end," Hennessey explains.
One of the nice things about saving for college now is a 529 college savings plan. They have many advantages if you use them. Withdrawals are tax-free, they are sponsored by states or large fund families for some extra safety, and they are flexible, working as either a savings or prepaid tuition.
However, there are some drawbacks to using the 529 college savings plans. First, there are high fees. Secondly, the money can only be used for education. "Johnny's got to go to college or you lose a lot of the tax benefits," warns Hennessey. Finally, 529 accounts count against your financial aid. If you've saved up a lot, you may not get the best deal on a loan or you might receive less aid.
There are other options other than the 529 plan, but the key is to save your money. How much should you save? Hennessey always suggests never putting money into a college savings that you were originally saving for retirement. "When you get ready to retire, it's not like you can take out a loan," he says.
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by Jenn Eaker