The cost of a college education can be staggering, and...

DOLLARS AND SENSE

August 08, 1993|By Knight-Ridder News Service

The cost of a college education can be staggering, and tuition prices generally are rising at a rate of 7 percent a year.

But for those who save early, the picture is not so grim. A $10,000 investment when a child is 1 would grow to more than $31,000 by the time that child reached age 18, assuming a 7 percent annual return. Wait until age 15 to get started, and the same $10,000 grows to only $12,200 by age 18.

For parents looking to start early, here are some investment tips:

*If a child is between ages 1 and 10, college money should be invested in mutual funds that seek growth. These funds generally invest in the stocks of small or mid-sized companies.

*When a child is between ages 10 and 14, the money should be moved to a fund that invests for growth and income. These funds generally invest in larger companies that pay dividends. -- They also may include some bonds, which pay interest at a fixed rate.

*Between ages 14 and 18, the money should be totally reinvested in bonds. That's because bonds generally are less volatile than stocks.

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