1. Saving for your own retirement is more important than saving for college.
Your children will have more sources of supplemental money for college than you will have for your golden years, so don't sacrifice your retirement savings.
2. The sooner you start saving, the better.
Even modest savings can pack a punch if you give them enough time to grow. Investing just $100 a month for 17 years will yield nearly $51,000, assuming an 8 percent average annual return.
3. Stocks are best for your college savings portfolio.
With tuition costs rising faster than inflation, a portfolio tilted toward stocks is the best way to build enough savings in the long term. As your child approaches college age, you can shelter your returns by switching more money into bonds and cash.
4. You don't have to save the entire cost of four years of college.
Federal, state and private grants and loans can bridge the gap between your savings and tuition bills, even if you think you make too much to qualify.
5. With mutual funds, investing for college is simple.
Investing in mutual funds puts a professional in charge of your savings so that you don't have to watch the markets daily.
6. 529 savings plans are a good way to save for college and get great tax breaks.
Qualified withdrawals will be free of federal tax starting in 2002 and most plans let you save between $100,000 and $250,000 per beneficiary. Plus, there are no income limitations or age restrictions, which means you can start a 529 no matter how much you make or how old your beneficiary is.
7. Tax breaks are almost as good as grants.
You may be able to take two federal tax credits -- the Hope Credit and Lifetime Learning Credit -- in the years you pay tuition. Or, if your income is too high to qualify for those credits, you may qualify for a new higher education expense deduction that will be in effect from 2002 through 2005.
8. The approval process for college loans is more lenient than for other loans.
Late payments on your credit record aren't automatic grounds for refusal of a college loan.
9. Lenders can be flexible when it's time to repay.
There are still ways to cut costs after you graduate and begin repaying your student loans. For instance, if you make 48 consecutive on-time payments, most private lenders will knock two percentage points off your interest rate.
10. Taxpayers with student loans get a tax break.
Starting in 2002, you may deduct the interest you pay up to $2,500 a year if your adjusted gross income is $65,000 or less if you're single or $130,000 or less if you're married filing jointly. (In 2001, the eligible income limits are lower and you may only deduct the interest for the first 60 months in which payments are made.)
Next: What's the best way to invest?