Saving for kids 101: The sooner you start, the better

When your babies are keeping you up all night or taking their first steps, you probably are too busy to spend much time thinking: "I wonder how we're going to pay for Junior's college education."

Well, here's something for parents of little ones to consider: Today's college graduates have an average student loan debt of $25,250, according to Moneycrashers.com. Imagine how much that number will grow by the time your little ones do the graduation walk.

When it comes to saving for your children's college education, the sooner you start, the better. The first question to ask yourself: What do you expect of your savings plan? Do you intend to foot the entire bill for your child's education, or do you expect your child to contribute as well?

"More than anything, it comes down to: what are you trying to do for your children?" said Kraig Rowekamp, financial adviser for Bremer Bank in Grand Forks.

Here's a first tip: Before you go to a bank or financial adviser to set up a college fund, your child needs to have a Social Security number. Then, it's a matter of deciding what you want to accomplish and how much you can contribute.

Rowekamp described three main routes area parents take in saving for college.

529 savings plan: Funds are designated specifically for college tuition and other approved educational expenses. Tax-free earnings grow, and parents and grandparents can establish accounts in their names. Plans differ state to state, but as long as your student uses the earnings portion of the money withdrawn on eligible educational expenses, it will not be subject to income tax.

Custodial account: The parent is the custodian, and this account doesn't grow tax-free. However, there are no limitations on how these funds can be spent.

Personal savings accounts earmarked for college.

As for IRAs, there are some provisions that allow money to be removed for education costs. But IRAs are for retirement, and parents must consider how many more years they have to save for their retirement vs. how many years their children will have to pay off college loans, Rowekamp said.

Whether you intend for your child to attend UND or Harvard, you can go online and find features that will help you figure out what the expenses will be for your child. Then, you have to consider your income and expenses and decide how much you can contribute.

There's no way of determining exactly who's saving what and how, but Rowekamp believes more parents today than ever are trying to put money aside for their children's education.

"It's a pretty daunting task when you're trying to find the money to meet the total cost," he said. "I do think there are more and more people who are inquiring about that and trying to find ways to save."

Many parents want to do everything they can to save for their children's education. But there's another school of thought that says the best thing you can do for your kids is to ask them to pay at least some of their own way. Research from the School of Family Life at Brigham Young University found that kids whose parents were footing the entire college bill were the most likely to be partying and possibly floundering.

Parents have to decide for themselves how much they want to help, Rowekamp said.

"I guess from my standpoint, everybody is different. If you make your kids work for it, they're probably going to go to classes if they have a little skin in the game."

On the other hand, what better gift for a young person than education without the burden of student loans?

Here are other things to take into account when considering your child's college fund, according to Moneycrashers.com.

Encourage your child to work hard in school. Higher grades can result in scholarships, academic or athletic.

Take college-level courses in high school. Advanced placement courses allow students to take a test for college credit.

Start at a community college. You can save money on tuition, textbooks, and room and board if your child continues to live at home.

Take online courses. Again, you can live at home and save money.

Apply for financial aid. Not all students will qualify, but you and your child should be sure to fill out the Free Application for Federal Student Aid (FAFSA) to find out how much you are eligible to receive.

Receive college tuition reimbursement. Some companies offer employer tuition reimbursement for their employees.

Attend a work study college. There are U.S. colleges that students can attend for free. The catch? Students are required to work at the school while attending.