usiness
Pa
As college costs continue to climb,
the experts offer three words of
advice: Invest, invest, invest!
ALAN HITSKY ASSOCIATE EDITOR
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obert Levy and his wife have a 14-
month-old son and another child on the
way. Even though college is a long way
off, Mr. Levy says, "the subject is very
fresh on my mind."
Mr. Levy is first vice president-in-
vestments at Prudential Securities in West
Bloomfield and he has the scary projections
at his fingertips:
In the year 2013, the average cost of a four-
year college education in Michigan, including
tuition, fees and living costs, will be almost
$109,000 at a public university (up from the
1995 estimate of $28,000 for four years). In 2013,
the average cost for four years at a Michigan
private university is expected to be $175,000.
And those are averages. Prudential Securi-
ties estimates the four-year total for the Uni-
versity of Michigan Ann Arbor campus will be
$160,000 — or $40,000 per year — by the year
2013.
Howard Rosen, at Dean Witter Reynolds in
Birmingham, sees the figure in the year 2016
for the top private schools in the nation reach-
ing as high as $268,000 for four years.
So what's a parent to do? Surprisingly, Mr.
Levy, Mr. Rosen, and several other investment
counselors and bank officials contacted sepa-
rately by The Jewish News were unanimous in
their answers: Invest, starting right now.
Whether your youngster is a newborn, a 10-
year-old or even a high- school junior, there are
investment strategies that will help pay for col-
lege. But the earlier a family starts setting aside
the funds, the experts agree, the better.
In addition to Mr. Rosen and Mr. Levy, oth-
er advisers who responded to the question of
how to save for college included Herman
Schwartz, senior vice president-investments at
First of Michigan Corporation; Patrick Bain, fi-
nancial services representative at Franklin
Bank; and Norm Lining, branch manager of
Sterling Bank in Birmingham.
They suggest an investment strategy to
match the age of your child. With a newborn,
you have 17 years to ride the market roller coast-
er. You can be more aggressive in your approach.
Howard Rosen likes 75 percent of the portfolio
for the newborn in mutual funds and 25 percent
in zero coupon bonds.
Herman Schwartz would put 20 percent in
zero coupon bonds, 50 percent in a growth mu-
tual fund and 30 percent in a more aggressive,
but riskier, fund that buys technology and
biotechnology stocks.
Mr. Bain at Franklin Bank takes a similar
approach: 40 percent in small capitalization
funds, 30 percent each in large capitalization
funds and international funds.
For a 10-year-old, Mr. Bain and the others
get more conservative because there are only
seven to eight years before college. Mr. Bain rec-
ommends 65 percent in stock funds and 35 per-
cent in bond funds. Mr. Rosen recommends the
same percentages divided between mutual funds
and zero coupon bonds.
And for the 16-17-year-old member of the
Class of 1996 — just one year away from the
halls of ivy — Norm Lining of Sterling Bank
suggests certificates of deposit and treasury
bills.
Franklin Bank's Mr. Bain has a
slightly different mix for the
Class of 1996: 70 percent of
any college savings in bank
products, 20 percent in
bond mutual funds and 10
percent in stock mutual
funds.
The percentage mix
within these categories,
he says, should be: Bank
products, 60 percent in a
two-year certificate, 30 per-
cent in a one-year, and 10
percent in a liquid money
market fund. The bond
mutual fund portion
should be split 75 per-
cent in U.S. govern-
ment funds and 25
percent in corporate
bond funds. The
stock fund should
be 100 percent blue
chips.
All of the advis-
ers have specific
suggestions and fa-
vored funds. The
ones we spoke to
were unimpressed
with the new Michi-
gan College Bonds.
"They are nothing but
municipal bonds paying
5 percent interest," said
one.
HOW MUCH?
The big question,
assuming you are
not going to wait until Junior
starts college to begin thinking about
how to pay the bill, is how much do you
need to put away now to pay for college later?
Rob Levy at Prudential prepared a table for
his son Jacob, the 14-month-old.
Using the University of Michigan cost esti-
mates, Mr. Levy would need to make a $50,762
investment today at 6 percent interest to give
Jacob a $160,000 Maize and Blue education.
Mr. Levy could achieve the same goal by in-
vesting $378 per month at 6 percent. If Mr. Levy
waits six years to begin the monthly investing,
he would need to invest $690 per month and get
a 6 percent return to fund that
college bill.