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Financing a family
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June 30, 2000: 12:39 p.m. ET
Young couples should start saving now to pay for child's education
By Staff Writer Rob Lenihan
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NEW YORK (CNNfn) - It's still the same old story: You fall in love, you get married, and you pay bills.
For a young couple, the cost of starting a family can seem overwhelming. Clothing, medical bills, education—the numbers pile up very quickly.
One study puts first-year child raising costs somewhere between $5,500 and $11,000, and that's without day care, which could run another $7,000 or more.
A college freshman entering an Ivy League college in the year 2010 will have to pay $313,000 for four years of tuition, board and books. Private colleges will cost about $209,000 and public schools will go for $100,000.
"Children are a wonderful, wonderful gift of life," said personal finance expert Lorayne Fiorillo. "But they're also an expensive little gift."
Still, as scary as the costs may seem, experts say this is no time to give up. Kalman Chany, author of "Paying for College Without Going Broke," said parents have to start saving now.
"Don't procrastinate," he said. "And don't get intimidated by the figures. Anything you do now will be better than doing nothing. It's not going to be easy, but it's doable."
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Start saving—pronto!
Faced with these impending bills, a young couple really has only one choice and that's to start saving right now. Fiorillo, author of "Financial Fitness in 45 Days," suggested socking away about $3,100 a year.
"A college education isn't so ridiculously out of whack," Fiorillo said. "It ain't cheap, but it's not as expensive as people think either."
Click here for a story on long-term child raising plans.
Even if this money grows at only 8 percent a year, you'll have $125,000 by the time your child enters college. If you wait, however, until your kid's in high school, you will have to come up with a lot more dough—roughly $25,700 per year.
"The sooner you start the more flexibility you have, " Fiorillo said.
Chany advised against setting up any funds in your children's names. If you give up custodial care of the funds, your kids can spend the money on anything they want once they turn 18.
Secondly, assets in a child's name are assessed far more heavily on financial aid than on assets in the parents' name. For example, $10,000 in a student's name can reduce financial aid eligibility by $3,500, while $10,000 in the parents' name can reduce financial aid eligibility by only up to $565.
The feeling's mutual
Financial advisor Ric Edelman said parents have a lot of time to work with before their child becomes old enough for college. 
"We find parents investing much too conservatively," he said. "They're worried about risk when they don't need to be."
Edelman is a fan of stock mutual funds as a savings alternative. You can open an account for about $100 and can contribute $25 or more.
"You don't have to worry what stocks to pick," he said. "The fund manager takes of that. This allows you to focus your efforts on saving."
Edelman said payroll deduction offers parents another possibility. Under this plan, a portion of your paycheck is sent directly to a mutual fund in a "totally painless" transaction. As an alternative, he said, you can have a mutual fund company take a certain amount out of your checking account every month.
As your child gets closer to college age, Chaney said you want to have a higher percent of your assets going to fixed income. Sell stocks or bonds that will produce capital gains in the year before January 1 of your child's junior year.
"You don't want to be caught when the market takes a dive," he said. "You want to know the funds are there—I got them when I need them."
To work or not to work?
In his book "The Truth About Money," Edelman discusses the pros and cons of having both parents work while raising young children. On the one hand, if both parents work, there are increased costs of commuting, clothing, meals, and, of course, day care.
Plus you will both be away from your child for most of the day and then have to decide who will stay home when your child becomes sick.
However, Edelman writes, if a wife gives up her job, she can harm her career when she decides to return to work. Also, the lower-earning spouse might have the health insurance benefits and if you quit work for five years, you will see a much lower retirement income.
Hard to choose? Edelman pointed out that at least you have a choice, something many parents fail to realize. He named job sharing, flexible work schedules and working from home as some of the options open to parents.
And that brings up another issue. Chany warned parents not to save for their children's education at the expense of their own retirement.
"If you take care of your retirement," he said, "you can either borrow the money or take more out of your current income when you child goes to college."
You might even consider spending for your own education. If you think additional schooling will increase your earnings potential down the road, then do it. The additional money will help pay for your child's schooling. 
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