Whether you've been saving for years or you're just getting started, these three steps can help ensure that you and your Money Group members are financially prepared for your children's first day of school.
  1. Find out what college is really going to cost you. Some parents mistakenly look at tuition costs for the year they start saving and fail to reevaluate based on inflation. Rising tuition costs are one thing you can almost always count on. Fail to take that into account, and you may have less than a third of what you need to cover four years of college, estimates Mark Kantrowitz, an education consultant and publisher of, a nonprofit, comprehensive site on financial aid.

  2. Get a fix on financial aid. Even if your children are young, you can still get an idea of how much and what type of aid you can qualify for. Paying for tuition usually encompasses several forms of aid, including loans, scholarships, grants and work-study. For more information and help figuring out what your child will qualify for, go to

    The good news: There are a lot of resources out there if you know where to look. Today 1.5 million students who would likely have qualified for Pell Grants—a form of federal financial aid that doesn't have to be repaid—don't even bother to apply, according to the American Council on Education. (Go to to see if your child is eligible.) And that's not all the money that's being left on the table.

    A word of caution: Financial aid administrators are there to help you, but that doesn't mean they can't say no. It's their job to distribute the college's financial aid money fairly among those who qualify, so what you get could depend largely on the year and on the college. "Parents have a false sense of security that scholarships, grants and colleges themselves will help them come up with the money," says AllianceBernstein's Jennifer DeLong. What's more, 78 percent of the aid administrators surveyed by AllianceBernstein said that parents' expectations for significant merit scholarships interfered with their efforts to save. No matter what you think the future holds for your child in terms of aid and scholarships, don't scale back on your savings goals.
  1. Start a college savings account now. The options are vast, but 529 accounts are one of the best bets these days. It doesn't take much to start one of these accounts (minimums are low, usually around $500) and earnings grow tax-free. What's more, The Pension Protection Act finally mandated withdrawals from these accounts used to finance higher-education expenses will be permanently tax-free. In addition, some states allow you to write off your contributions on your state taxes, which can be a huge break. You must use the funds for qualified education expenses, however, to qualify for these tax breaks.

    A Roth IRA is another good savings option. If your income doesn't exceed $160,000 for married couples filing jointly or $110,000 for singles, make this contribution immediately after you exhaust any 401(k) matching dollars. The Roth, unlike other retirement accounts, allows contributions to be withdrawn at any time (without taxes or penalty, since taxes have already been paid) and earnings to be withdrawn without penalty if you're putting them toward education. Essentially, it's an account you can use for retirement or college.

    And don't forget the little things. Six years ago I opened an account with Upromise, a rewards program that puts money into your tax-deferred college savings account as a thank you for shopping at certain retailers. It's free money that doesn't come out of your pocket. Without even taking full advantage of the program—I routinely shop online but sometimes forget to go through the Upromise portal—I've still managed to rack up about $1,000 in my account.
Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.


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