Expert: Gina Boykin - 9/18/2007

Question
I've been delaying college for the past year while working in order to save money so that I can afford the college but I'm not able to save money fast enough using regular money markets and savings accounts.  I have about $5,000 saved so far out of the roughly $65,000 I will need for all four years.  At this rate I'm going to be an old man before I can pay for college.  I have a decent job with a good salary and can put away anywhere from $500 to $1000 per month.

My question is, where is the best place to put the money in order to get a high enough return to be able to go to college soon?

I've never done any investing before except for a simple money market that I keep money in that gives roughly a 5% annual return.  I switched to the money market from a regular checking account.

I've heard about stocks and funds and bonds and all that kind of stuff but I'm not sure where to go and what to look for.  What's the fastest way to save/invest money for college?

Thanks,
Joe

Answer
To be honest, investing in something with higher returns (like bonds or stocks) is usually for time frames great than 5 years.  Any period less than that, and you could make a higher return, but you could also chance making a lower (or even negative) return.  Since you are saving for a specific and important goal - that may not be the route for you.  If you can stash up to $1K each month, that means you will have the $60K that you need in just 5 years - even without any interest.

Also, if you will be working while you're in school, you actually won't need all of the money up front.  You will only need $15K each year.  You could very well start school in 18 months.  At that point you will have $23K if you do save $1K each month.  If you can continue to save, you will have the money you need each year when school starts.

You can also consider researching scholarships/grants for college to lower the cost of school.

Hope that helps!