海角大神

Let鈥檚 say you have a child today. You鈥檙e estimating that their college education will cost $25K a year, so that child is going to need $100K in eighteen years in order to pay for college. Let鈥檚 also say you can earn a steady 6% return on that money you save.

If you wait until the child is ten years old to start paying for college, you鈥檙e going to have to save $917 a month to reach that goal.

If you wait until the child is five years old, you鈥檙e going to have to save $442 a month to reach that goal. That鈥檚 a lot cheaper.

If you start when the child is born, you only have to save $271 a month. In fact, if you start as soon as you discover the pregnancy by starting a college savings plan for yourself and transferring it to your child, you only have to save $250 a month.

For a lot of people, $917 a month is either impossible or seriously challenging, while $250 a month is well within reason. That鈥檚 the difference between starting now and starting later.

Obviously, this same phenomenon works for any long-term goal you鈥檙e saving for. The longer you devote to saving, the less you have to save out of your own pocket overall (because interest is doing more of the work for you) and the less you have to save per month as well. A long-term approach turns something that seems impossible into something that seems quite doable.

The question really isn鈥檛 whether or not you should start saving right now. You should. The only real question is what your college savings goal is.

For example, if you intend to only save enough for a few semesters of textbooks 鈥� say, $2,000 鈥� you鈥檙e still better off starting your savings at birth than waiting until the child is 18. At age 18, you鈥檒l have to come up with the $2,000 out of pocket. If you start saving when the child is a newborn, you only need to save $5.50 a month.

In that $5.50 a month example, you鈥檙e actually only saving $1,188 out of your own pocket. The other $812 comes to you in the form of interest, which is the real reward for saving over such a long period of time.

The sooner you start saving for any goal, the more time you give for interest and growth on your investment to help you.

If you have children, right now is the time to start saving for their future education, even if it鈥檚 just $5 a month. Put it in a savings account for starters, but eventually you should look into a 529 college savings plan for your child.

This post is part of a yearlong series called 鈥�365 Ways to Live Cheap (Revisited),鈥� in which I鈥檓 revisiting the entries from my book 鈥�,鈥� which is available and at bookstores everywhere. Images courtesy of , the proprietor of which is my .