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Just because school is out for the summer doesn't mean you can forget about funding Jackie and Jeremy's future college educations.

Facing the costs of a college education can be daunting. With four-year college expenses today running into the tens of thousands of dollars, just image what they'll jump to in 10 and 15 years is enough to make many parents shudder. Or worse yet, not even think straight. Which, according to a recent survey, is what many are doing.

A survey conducted by the Mosaic Funds in Madison, Wisconsin, shows that parents have a tendency to be overly optimistic and not very realistic about where they will find the money for college expenses.

Larry Tabak, vice president at Mosaic Funds, said that of the 604 parents they surveyed, all with children under the age of 12 and whom they planned on sending to college, most figured that the No.1 source of income for future college educations would be from "free money" such as grants and scholarships. "Way down of the list of possible (money) sources were savings and loans, " say Tabak. " In reality, it's just the opposite with most college education funding coming from savings and student loans."

Because the cost of higher education can easily equal---if not exceed-- the cost of buying a home or condo, planning on where those dollars are going to come from is more important today than ever before. But if you're new at the parent game or at long-term financial planning, it might make good sense to find out now about the various ways to invest for future educational purposes. And that's where Mosaic Funds can help.

According to their research:

  • Most states, including Florida, sponsor a tax-advantage college savings plan. To find out more about those programs, the quickest source is on-line at www.collegesavings.org. From that home page you'll be able to click-on your home state and learn more about the programs offered and appropriate contact sources.

  • Education IRAs are worth investigating. These are custodial accounts created specifically for the purpose of paying for qualified higher education expenses for the account beneficiary. The maximum contribution one can make into an Education IRA is $500 per year.

  • Need an idea of what tomorrow's college costs will be? If you have a child who is 10 years old today and expects to go to their home-state university in eight years, the best estimates show that education will cost around $55,000.

  • You can fund up to the total cost of your child's college education via your own IRA ---penalty free--- provided it's more than six years away and assuming you will be under age 59 when taking the distribution. Using a Roth IRA, you're able to use only the money that's invested---not the earnings---tax and penalty free to fund your child's college education---provided the education beginning date is at least six years away and assuming you will be under age 59 when taking the distribution.

  • Yes, 100 bucks a month will get you somewhere. If you started saving $100 a month when your child is born, and that money earns 10 percent a year, that account would be worth approximately $50,000 when the child reaches age 18.

To learn more about the various ways of funding college educations, and understanding programs like custodial accounts, the Education IRA, and the HOPE Tax Credit, the Mosaic Funds has created a 36-page booklet that's titled "Mosaic's Guide to College Financing". It's free. Just call 1-888-670-3600, and request it.

To read more articles, please visit the column archive.

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