The smart money's on parents who start saving early for college A Course in Accounting

THE BALTIMORE SUN

An article in yesterday's paper about parents paying for their children's college education contained incomplete information about one of the families involved. The article should have noted that Ari and Eric Mossovitz live with their father, Sidney, and his second wife, Sharon, who also have contributed to their support and college education.

The Sun regrets the error.

David Cramer considers when he should have started saving for his daughter's college education.

"When she came home from the hospital. No. When she was born. No. When she was conceived!" says Mr. Cramer, whose "baby" is now a sophomore at West Virginia Wesleyan College. He speaks with tongue only slightly planted in cheek.

Yes, it's that time of year. The kids are off to school, and for parents of college students that means finding the money to pay for it.

Freshmen entering the University of Maryland at College Park will pay nearly $3,500 a year in tuition and fees, while at the private Goucher College the tab will be more than $15,000 for tuition, room and board. A decade ago, those costs were less than half that.

And the future? In 18 years, college costs are expected to exceed $48,000 a year for a private school and $22,250 for a public school, says financial planner Barbara Manekin Spodak, estimating tuition and room and board expenses.

"First you come up with the estimate, then you pick the parents off of the floor," says Mr. Cramer, who, besides being the parent of a college student, runs his own financial services company.

And parents with middle class and higher incomes are every bit as panicky as those who earn less money, Mr. Cramer says. Traditionally, it is those parents who are expected to contribute more because they have more.

"College is just as big of a shock for those with money as it is for those without," Mr. Cramer says.

It's tempting, but a parent's next step should not be giving up and leaving the whole thing in the hands of fate, both financial planners say.

"I have clients who say, 'Well, it will just be taken care of,' " says Mrs. Spodak, who works for Dean Witter Reynolds Inc. "They say they are going to sell a building or something. Well, what if that building doesn't sell?"

Pretty soon people will have to face a day of financial reckoning -- and the earlier the better, she says.

Lifestyle cutbacks

For Elizabeth Caplan, that day arrived eight years ago when she separated from her first husband.

"There was no money saved for college," says Mrs. Caplan, whose eldest son was 14 at the time.

"I started putting away $500 a month," she says. "I did that most of the time. Occasionally, it was $300 a month or $400 a month." Without a doubt, there were changes she had to make, such as hanging on to her car longer. "I did have to cut back on my lifestyle," she says.

Mrs. Caplan remarried in 1990. Today, she and her husband Richard, have four -- count 'em, four -- children in college.

There's freshman Eric Mossovitz, 18, who began at West Virginia University a few weeks ago. Ryan Caplan, 21, is a senior this year at the University of Delaware. Scott Caplan is in his second year of graduate school at the University of Delaware. Ari Mossovitz, 22, is just beginning his first year of law school at Wagner College.

And there's still one more to go. Michael Caplan, 16, is a high school senior who plans to attend college next year.

"Even getting kids ready for college is expensive," says Mrs. Caplan, who had recently returned from driving Eric to school.

"His clothes, his books, we had to replace things on the computer. We've spent close to a $1,000 just getting him ready!" she says.

To get their children through college, the Pikesville couple invested money in growth funds instead of letting it sit in a low-interest bank savings account -- a move recommended by many financial planners. They applied for grants and scholarships, used some proceeds from a home Mrs. Caplan sold, received help from other family members, and the older children work and applied for loans. In short, they did their homework by calling on numerous resources.

Moments of anxiety

Even so, they have moments of anxiety. "There are still expenses even for the ones who are self-sufficient. I helped my son furnish his apartment, and we pay my stepson's car insurance," she says.

Mr. Cramer's moment of awakening came when he was presented with the bill. "I never realized the value of planning for college until I wrote that first tuition check," says Mr. Cramer, who is a former tax specialist.

Fortunately, his daughter, Ilyse, turned out to be a good athlete and has received scholarships that pay almost half of her tuition.

"That was a God-given talent that we had nothing to do with," says Mr. Cramer, who now realizes the irony of a financial planner who hadn't planned for college.

"Did my wife and I properly plan for our kid's college? No. When I talk about funding for college, some people think I am just blowing smoke. Just trying to make a sell. But I wish someone would have sat me down and said, 'If you don't start putting money away for this, you are going to regret it,' " he says.

Mrs. Spodak says putting even a small amount away is better than nothing. "Even if it is $100 a month, put something away," she says.

She recommends that new parents start a separate "custodial" account for the baby in the event the marriage runs into trouble.

"I have been a single parent who went through an acrimonious divorce," she says. "But the custodial account was never in the picture. Itwas not part of the mix."

Although some people prefer the safety of savings bonds, certificates of deposit and bank savings accounts, Mr. Cramer doesn't recommend them for his clients because of the relatively low rate of interest.

"I recommend putting the money into growth funds . . . a good quality mutual fund that has been around for many, many years," he says.

And then commit a manageable amount of money on a regular basis. "Don't commit to $500 if you feel you can't sustain it," he JTC says. Most people, he says, will simply stop putting away any money instead of adjusting the amount downward when hard times hit.

"This is a monthly set-aside that needs to be treated like a liability -- like a mortgage. Do it religiously," Mr. Cramer says.

Jeffrey and Karen Myers are heeding Mr. Cramer's advice.

The couple are the parents of 3-year-old Allison. They began saving $150 a month for college when she was 6 months old.

"My mom paid for a good deal of my college education," says Mrs. Myers, who works for a computer company. "But toward the end, I had to depend on student loans, which can be quite a burden -- which still is! I don't want Allison to be burdened with it."

Sacrificing for security

The Myerses say saving the money is a priority for them -- not a hardship. "We do know that somewhere down the line, there will be sacrifices to be made," Mrs. Myers says.

"There is security knowing the money is there for her," says Mr. Myers, who's in sales.

And for those who who do not have that security?

"I don't want to scare people into thinking they will never be able to afford college. But you have to diligently put something away -- even $100 -- once a month, every month. You have to do it," Mrs. Spodak says.

And don't despair -- every family should research financial aid, grants, scholarships and loans.

"No kid should ever have to say they are not going to college because of not having money," Mr. Cramer says. "There's a college somewhere that can offer something."

GETTING STARTED

How much should you be saving and investing for a child's college education? Here are two hypothetical cases from advisers at Dean Witter Reynolds Inc., assuming a 6 percent annual cost inflation and an investment return of 8 percent:

* If your child is age 1: You would need to invest $1,000 today and add $204.56 each month for 17 years to pay for four years of college. Your total savings would top $89,000.

* If your child is age 10: You would need to invest $1,000 today and add $388.78 each month for eight years to pay for four years of college. Your savings would be nearly $53,000.

CORRECTION
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