The sooner parents save for education, the better

School days, school days.

As American students head off to college this fall, they leave behind family budgets that may or may not have been planned adequately for this important event.


The sooner parents plan for a child's education, the better. That infant staring up at you from the crib has a future that's largely dependent upon you. Don't let the youngster down.

A rule of thumb -- likely an overly optimistic one -- is that you should try to have the cost of a college education put aside, earning dividends until that future college date. But whatever you realistically can put aside on a regular basis, have a method to your investment.


This column asked investment experts for three recommendations apiece to finance an infant's future college costs and received the following responses:

* Ross Levin, president of the International Association for Financial Planning and a Minneapolis-based certified financial planner: "My first choice for college investing would be the small-company Royce OTC Micro-Cap Fund, a closed-end fund traded over the counter. My other selections would be Montgomery Emerging Markets and Tweedy Browne Global Value, two open-end, 'no-load' (no initial sales charge) funds. It makes sense to have long-term dollars in the fastest-growing world economies. Develop a philosophy about how much of your child's schooling you're willing to pay for. I paid for 100 percent of my schooling, so I have a bias toward having children pay for at least some of their education."

* John Rekenthaler, editor of the Chicago-based Morningstar Mutual Funds investment advisory: "I'd first put money into some small-company funds, such as the no-load Columbia Special Fund and Meridian Fund. Secondly, I'd put money into a balanced fund, such as the no-load Evergreen Foundation Fund and Fidelity Balanced Fund, for exposure to larger companies and to bonds. Finally, I'd select an international fund such as the 5.75 percent-load EuroPacific Growth Fund or the no-load T. pTC Rowe Price International Stock Fund. I'd split the money up by putting half into the balanced fund, with 25 percent apiece in the small-company and international funds."

* Arnold Kaufman, editor of The Standard & Poor's Outlook investment letter based in New York: "My first investment choice would be zero-coupon corporate bonds, specifically several you don't have to pay taxes on each year (as you would ordinarily on zero-coupons) because they were 'grandfathered in' a number of years ago. These are GMAC zero-coupon bonds, due 2012 with a yield to maturity of 8.5 percent, and Seariver Maritime zero-coupon bonds, due 2012 with a yield to maturity of 8 percent. My second choice would be a growth mutual fund such as the 5 percent-load IDS New Dimensions. My third choice would be the stock of Shaw Industries, the largest carpet manufacturer, which has an excellent growth record."

* Charles Allmon, editor of the Growth Stock Outlook investment letter in Bethesda: "I'd put 50 percent of the child's investment money in U.S. Treasuries of three-month, six-month, one-year and five-year durations. Then I'd put the rest of the money into the stock of Genuine Parts, Clorox Co., Bristol Myers-Squibb, UST Corp. and Automatic Data Processing. These investments aren't going to blow away but will be around a good long time and aren't overvalued. I'm a value player, but no one is looking at value now. They just look at an investment's momentum, and then sell it if it stops going up."

* Ralph Seger, who heads investment advisory services of the National Association Investors Corp. in Royal Oak, Mich., which has more than 12,000 investment clubs: "I'd invest that education money in the stock of Coca-Cola Co., McDonald's Corp. and Stryker Corp. They're all growth companies selling at price-to-earnings ratios that are less than their five-year average price-to-earnings ratios. Coca-Cola has international name recognition and McDonald's will grow at least 10 percent a year. Stryker, a maker of non-invasive surgical tools and items such as artificial hips, is a health care stock with 18 percent annual growth."

These recommendations are a starting point. Do your investment homework now so your child can do his or her homework later.