Dig up the coffee can in the backyard, you will need something better

I have decided to take an educational direction for my weekend posts. As a father of a 5 month old, I have already started college planning. In today's work environment, a four year college degree is no longer a "looks good", it is a "must have". So will opening up a 529 plan and adding a few dollars here and there get the little one to college? It may get you through one semester, but if you want your child to finish without a large student loan for a graduation present, you need a plan.

The average annual cost of a public 4 year college is $7,020. According to the College Board, this annual cost of college has been increasing at a rate between 6-9 percent per year. So, how many years do you have before your child is heading off to college? Using my daughter as an example, I have roughly 17 years. This means that the $7,020 annual cost today will be $18,903.27 in 17 years based on a 6% annual increase.

So, lets say that you decide to ditch the coffee can and invest for college in a balanced portfolio earning 9%. You will need to make annual contributions of $1,800.15 to hit your goal. The older your child is and the more conservative your investments are, the more you will need to contribute. Good luck and get savings!

Next weekend, I will take this to the next level and we will look at the different investment options for college savings and how to maximize your return without excessive risk.