Don't Save for College (In Your Child's Name)

Saving for college is widely seen as something good and noble that all parents should attempt to do. And saving for college is good and noble – but it should be done in the right way.

Unless you're able to pay cash for college and your student won't need financial aid to attend, do NOT save money in your child's name. Doing so will only reduce the student's financial aid award.

In calculating awards, parental assets and student assets must be reported. The problem is that student assets have a far greater negative impact on the calculation than parental assets do.

Every additional $100 in student assets reported reduces financial aid by roughly $25, whereas an increase in reported parental assets decreases financial only $6.

Save for college, yes, but put those savings in a separate, dedicated account in the parents' names – not in any kind of student-named fund.

There's no reason to give away financial aid money!

Be smart, and save for college in a dedicated non-student investment vehicle.

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