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A Penny Saved

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may mean a college education for your child. Why you should cancel your vacation and start saving now.

ELIZABETH APPLEBAUM

AppleTree Editor

T

he options for saving are as
varied as Madonna's ever-
changing persona.
Parents looking to set aside money
for their children's college education
can opt for anything from IRAs to
stocks to bonds to special college
investment funds to pandering to rich
Uncle Bob and everything in-between.
No one can guarantee a fortune with
any of these, but at least it's a start.
There is, however, a guaranteed path
for failure when it comes to a college
fund, and it's a path many parents
take every day:
"Why should I save anything? My
kid's at the top of his class! He's sure
to get a complete scholarship!"
"That is an absurd and demoralizing
attitude," says David Littmann, chief
economist for Comerica Financial
Services. "I've seen it fail 100 percent
of the time."
In fact, Littmann says, the time to
start saving for college is the second
you know you're having a child. From
that moment on, your life should be
firmly guided by two concepts: "finan-
cial discipline and priorities."
For many parents today, the very
idea of college tuition is, in a word,
terrifying. And they're terrified with
good reason. Higher education costs
big bucks (see accompanying story,
"You'll Pay, All Right'), well out of the
range of even well-to-do families.
Yet a college education is pretty much
de rigueur when it comes to getting a
good job, and most Jewish children
grow up with the idea that, regardless of
their future profession, they will attend a
university after high school.
Saving for college may seem an
impossible task, but David Littmann
says it can be done if you follow those
guidelines of discipline and priorities.
Begin by investigating the many
financial options for saving and see
which is best for you. Whatever you
select, set aside at least 15 percent from
each pay period for college, he says.
Don't worry when your investment
doesn't double as quickly as you like.
"Even at low interest rates, your dol-
lars will accumulate and compound,"
Littman says.

The Kelman family has been saving for college ever since their first child Justin, was born.

Next, reassess the way you're spend-
ing now First on your review list
should be entertainment and travel.
A number of families feel an annual
vacation is a necessity. With saving for
college, though, you may have to
make that vacation a biannual event
or cut it out altogether.
Chances are you'll have to tighten
up elsewhere as well, Littmann adds,
"and this can take imagination. But
education is the key to the future, and
this must be understood. It needs to
be a priority. Our ancestors under-
stood this and they made many
accommodations" so their future gen-
erations could attend school.
Your mantra should be: "Save."
"Most families just don't want to
make sacrifices," Littmann says. "But
remember, every dollar you spend now
should be leveraged against the afford-
ability of college later on."

How One Family Does It

Robert and Carolyn Kelman of
Southfield have four children, the old-
est of whom won't attend a university
for at least another eight years. Yet the
Kelmans have already set aside money
for each child's college education.
Soon after their eldest, Justin, 10,
was born (other children are Erica, 8;

Wendy, 6; and Jonah, 6 weeks), the
Kelmans did exactly what David
Littmann suggests: they decided how
and where their money should be
spent and saved and began following
the discipline and priorities guidelines.
The Kelmans sought out the assis-
tance of a financial planner, "which
made life a lot easier," Robert
Kelman says.
An emergency room physician with
St. John Macomb and occupational
physician at Providence Hospital,
Kelman asked colleagues to recom-
mend financial advisers and finally
settled on one who had a strong
track record.
The planner asked the family to
review all their expenses, everything
from synagogue dues to how much
they spent each week on groceries.
Every form of insurance was consid-
ered, as well.
"What he really helped us do was
organize," Kelman says. "As organized
as I tend to feel I am, I found I was
thoroughly confused in this area."
The adviser helped the Kelmans pri-
oritize: expenses that must be made on
a regular basis, like car payments and
electric bills, and those that only come
up from time to time, such as home
repairs or b'nai mitzvah, which would

be covered by a rainy-day fund.
Next, the Kelmans considered what
parts of their lives are necessary luxu-
ries and which are not. Robert has a
health-club membership, which he
says is definitely a luxury, but it's one
that promises long-term rewards: He
stays healthy to take care of his family.
Big vacations, on the other hand,
offer a lot of fun in the short term, but
they can be extremely expensive. So
the Kelmans have chosen to take very
few big vacations, but rather place
money they might have spent on a trip
into their children's college fund.
Robert also drives a used vehicle
rather than a brand-new car, which
provides another source of extra
money for their children's education.
Because they are financially responsi-
ble, the Kelmans regularly manage to
save money. Whether it will cover every-
thing for all his children Kelman doubts,
but he's certain "they will have some
funding; they'll be off to a good start."

Costs Have Changed

Looking back at college tuition a mere
10 or 20 years ago is enough to make
a grown man or woman weep, or at
least whine a lot.
In the 1980s, tuition at a good
private college might cost several
thousand dollars a year — a lot back
then, but even taking inflation into
account, it would be almost nothing
by today's standards.
"The problem of paying for college
tuition is much more difficult today
than it was years ago," Littmann
acknowledges.
At the same time, more options for
saving are available, as well.
Littmann recommends looking into
"maxing out your 401(k)" to start. This
money will not be taxed until it's taken
out of the account, and then only at a
reduced rate. Families also might con-
sider various in-state programs, where
you give a huge chunk of money to the
government, which then invests the
funds and promises to pay full tuition
at a state university later on."
Don't be intimidated by the finan-
cial rhetoric, Littmann says. Focus on
all the places where your money not
only will increase, but taxation will
be limited.
A PENNY SAVED on page 42

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2004

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