Whether your child is seven months old or 17 years old, you're probably thinking about what you need to save for his or her college education. Or maybe you're trying not to think about it.
The good news is that while college is expensive, it's still worth saving for, according to a New York Federal Reserve study released Tuesday. It concluded that both associate and four-year degrees are still worth the money, calculating the return on investment at 15 percent for current graduates.
In the United States, if you were able to look at every family's college fund, you'd find the average balance is $15,346, according to the "How America Saves for College 2014" report from student lender Sallie Mae.
That's 30 percent more than the $11,781 average balance of college funds last year. Clearly, many of us are doing better than during the Great Recession years when college savings accounts took a major hit.
To break down the numbers further, for families with teenagers, the average amount saved is $21,416. If your children are between ages 7 and 12 and you have $16,498 saved, you're in the average. For parents with kids under 7, the average is $10,282.
The problem for some parents is that the average cost of tuition and fees at an in-state public college during the 2013-2014 academic year was $8,893, according to the College Board. So that $15,346 in savings will only pay for about two years of college, based on the most recent academic year.
And if you have two or three teenagers and $15,346 saved, you have even less to go around.
You'll have an even tougher time if you want to send your child to a private school. The average cost for tuition and fees at a private college during the last academic year was $30,094.
It isn't just the tuition and fees that are high. Many parents forget to budget for room and board, college supplies and books. The College Board reports that the cost of tuition, fees, and room and board at four-year public colleges has increased by more than 45 percent in the past decade, from an average of $12,304 in 2002 to $17,860 in 2012. If your child wants to go to a private school, it's often double that, according to the College Board.
And the less you save, the more you or your kids will probably borrow. In 2012, 60 percent of students graduated with debt, averaging $26,500, according to the most recent College Board data.
Meanwhile, the average starting salary for class of 2013 college graduates was $45,327, according to the National Association of Colleges and Employers. So if your child has $26,500 in student loans and earns the average salary or less, it will take a while to pay the loans off.
But it's not all bad. The New York Federal Reserve study concluded that an undergraduate with a bachelor's degree can expect to earn around $1.2 million more than someone with only a high school diploma. Someone with an associate degree will, on average, bring in $325,000 more than someone with a high school education.
Suggestions for saving. Obviously, opening a 529 account, an education savings vehicle operated by a state or educational institution, is a must.
Beyond that, experts generally say you should:
Be realistic. Terry Seaton, a financial planner and certified public accountant in St. Augustine, Florida, says you should set a "savings goal that you think you have a decent chance of achieving. Many parents see the high cost of college and get discouraged, think it's hopeless and don't save anything. Better to save a portion of the college cost than nothing."
Seaton says your kids should also be realistic about college. "If you can only afford the local state college, they shouldn't be planning on Ivy League," he says.
Get into a routine of saving. Seaton suggests setting up an automatic payroll deduction or automatic checking-to-savings transfer to fund the college savings account every month.
Apply for financial aid. "Many people think that they aren't eligible. However, we urge all of our clients to complete a FAFSA form," says Jonathan Gassman, a certified financial planner and owner of the Gassman Financial Group in New York City. He's referring to the Free Application for Federal Student Aid, which every parent of a college-bound teenager becomes well acquainted with. "Many universities and colleges offer general and special scholarships to students," he says. "You really have no idea until you apply what you may end up with. Even though we had saved sufficiently for my eldest daughter, Hofstra University returned with a rich scholastic offer if she kept her grades above a 3.0."
Don't forget about grants. For instance, with the Federal Pell Grant, a student could be given as much as $5,730 for the 2014-2015 school year. How much they receive depends on factors such as the student's financial need and the cost of the school.
Put extra money toward college. Someday you're going to stop buying diapers or paying for day care. That money could go toward your college savings plan, says Mark Kantrowitz, senior vice president at Edvisors.com, a website focused on planning and paying for college, and co-author of "Filing the FAFSA."
Beg grandparents. No need to grovel or embarrass yourself, but Seaton suggests encouraging grandparents and great-grandparents to give cash gifts for holidays, birthdays and high school graduation, which will be used to increase the college fund.
Use rebate programs. Upromise.com is one example. You shop with your debit or credit cards, which need to be registered at the site, and a tiny percentage of what you pay for various products and services will collect in a noninterest-bearing Upromise account. As the money accumulates, you can transfer it to a 529 plan or savings account.
Ask your kids to contribute. Even if your kids sometimes want to spend their birthday money, other times they should put it into the college fund. "They need some skin in the game," Seaton says. Your child may be more willing to help than you realize. In late May, the College Savings Foundation released an online survey of over 500 high school students and found that 82 percent felt it's their duty to help pay for college. Last year, 74 percent felt that way.
[Read: 10 Ways to Teach Your Kids to Be Savers .]
Negotiate. "I believe most schools are willing to negotiate because of the student's unique ability and what they will bring to the table," Gassman says. This is assuming the student has a lot to bring to the table in terms of grades and accomplishments. If you believe you have a case, it's worth trying to negotiate with the financial aid office.
Get creative. If you have permanent life insurance policy, you could consider borrowing against it. "They may offer a discounted rate of interest," Gassman says. Other options include tapping your 401(k) for a loan and taking out a home equity line of credit. But Gassman only recommends creative borrowing if your finances are secure and interest rates are low. "Remember, your home is on the hook," he says of the home equity line of credit. Because while it's great to help your kids go off to college, it's also nice to have a home for them to come back to.