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How much to save for a child’s college education?

Dear Dave,

I have a question about saving for college. We have a little girl who is going to turn 2 years old next week. We’ve been investing for her college since she was born. We have about $2,000 invested in a College Savings Account and in an UGMA.

What is the minimum that we need to save each year in order to have enough for her to go to a public college when she is 18?


Tulsa, Okla.

Dear Penny,

What I would do is call the college you think she may attend and try to find out what the tuition inflation rate is, as well as what it costs to attend now. It will be hard to determine at age 2 exactly what school she will attend, but you can pick a state school just to get a general idea.

You can also get online and do a little research about the school. Right now, the cost is probably around $40,000. So you might estimate that it could cost somewhere around $80,000 in 16 years. With that in mind, at the rate you are saving now, you may end up a little short, so you may want to save a little more if you can.

Next year, when she is 3, you can start saving $3,000 per year in an Educational Savings Account, and at $3,000 per year, that should be more than enough. Just make sure you are in good mutual funds that have good track records. Do some research on this one, but it is definitely worth the effort.


How do I avoid Christmas debt?

Dear Dave,

I have always just assumed I would use my credit cards for Christmas and I just accepted the fact that, come January, I would always have a mountain of debt to pay off.

Then, I started listening to you. I was just wondering if you could tell me how I can make it through the coming Christmas season without waking up to a huge debt after New Years. Any help?


Huntsville, Ala.

Dear Carol,

‘Tis the season to dig a little deeper and share in the spirit of giving – and no one is going to let you forget it! Everywhere you go you’re faced with another gift to buy or a charity to support.

Giving is a wonderful thing if your intentions are in the right place. And when your intentions are in the right place, a little wisdom will help keep your finances in the right place as well.

Don’t let yourself get trapped in the shopping bonanza just because everyone else is doing it. It will be easy to justify overspending in the next few weeks because it’s a gift. The “giving bliss” could turn into a “giving miss” if you fall into this trap and end up with an empty wallet in January.

The first thing you need to do is look at your budget and see what you can afford to pay for in cash this holiday season. Once you and your spouse agree on this amount, make a list and check it twice. Include the names and amounts you are going to spend on each person or charity.

Once your list is finalized, the only way to make it work is to actually stick to it. It sounds like common sense, but it is easy to find something in the mall that you “just have to buy.” That is where the problems start. If you buy one extra thing for someone, you have to take away from someone else on your list. Keep that in mind.

Now that you’ve got a plan you can relax. Giving is not meant to be stressful on your finances. Give with the right intentions, give with a plan and balance your giving with the rest of your life.

Another thing to remember all year is that Christmas always falls on Dec. 25. Don’t wait until Thanksgiving dinner to realize that Christmas is right around the corner. You could even be really weird and set a little bit aside each month toward Christmas.

Remember that normal in America is broke – it’s OK to be weird.



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