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Your Finance: Two other ways to invest in a child's education

Saving for college has declined since the Great

Saving for college has declined since the Great Recession, according to a national survey by Sallie Mae. The percentage of parents with kids under 18 who put aside money specifically for college has dropped from 62 percent in 2009 to 51 percent in 2014. Photo Credit: iStock

Saving for college has declined since the Great Recession, according to a national survey by Sallie Mae. The percentage of parents with kids under 18 who put aside money specifically for college has dropped from 62 percent in 2009 to 51 percent in 2014.

According to Sallie Mae, the average amount in a college savings fund is just $15,000. Meanwhile, net price at a four-year public university for an in-state student, living in the dorms, is $12,620. And if current trends continue, the cost of college will almost certainly grow faster than your savings do.

If you're in a top tax bracket, have no debt, other assets and a lot of disposable income, yes, it's a no-brainer to save for college. There are tax benefits to using a 529 education savings account. And your child is less likely to be eligible for any need-based aid.

However, if you're living closer to the bone, then paying off your own debt, building up an emergency fund and stashing away money for retirement -- in that order -- have to take precedence over saving for kids' college costs. There are subsidized loans and grants available to pay for school, but not for your retirement or health care costs.

That said, it's only the very lowest earners who can count on federal need-based grants to pay for college. Most Pell Grant recipients come from families at less than 21/2 times the poverty line. So what to do?

I believe in saving for a child's education, but not necessarily in the traditional sense. If you have limited funds, there are two places where I think an investment in your kids' educational attainment can go the farthest.

The first is investing in any enrichment necessary to ensure that your child is performing on grade level all through school. This has a cumulative effect that is crucial for college success, not to mention merit-based scholarships and aid. Many point to third grade as a major milestone for reading skills, while algebra is the single subject that stops most students from getting a college degree.

The second is helping to build up an emergency savings cushion for your kids to draw on once they're in college. (Kids can and should contribute to this fund once they start working). Several studies and pilot programs show that small cash grants and gestures like a free transit pass can be extremely helpful in keeping students on the path to graduation -- and when some of that support comes from parents, it shows that you have their backs. There are cases where a little really does go a long way.

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