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With fees approaching six digits, it's never too early to look at investment strategies that can lighten the tuition burden

Minutes after they finished taking their vows, Leslie and Dwayne Bond began sweating over how they would pay for their son's college education. Married in 1989, the Bonds, now both 30, had decided Jarami's future would be a priority even before he was born. After assessing their debt--nearly $30,000 consisting of two car notes and credit card balances--the couple, who live in Upper Marlboro, Maryland, began paying their creditors off with a vengeance. Today, their bills are kept to a minimum--the only large expenditure they have left is their mortgage, which they hope to eliminate in 15 years.

In fact, Dwayne, an account manager at Oracle Corp. in Bethesda, Maryland, says the Bonds are doing so well, a townhouse the couple bought in 1991 has been earmarked for rental. They may even sell the unit in time for four-year-old Jarami's freshman year in 2011. Some might call them overachievers, but the Bonds believe their attitude has played a big a role in anything they've achieved. "We decided a long time ago not to try to keep up with the Joneses," avows Leslie, who operates Total Excellence Consulting, a home-based financial and time management business. "We truly believe the short-term sacrifices will bring us rewards in the long term."

That's sound advice for those of you who might be raising a budding genius. Financing the degree your son or daughter will need to survive in today's cutthroat marketplace is approaching $55,000 for four years and should well surpass that figure soon, according to the College Board, a New York-based nonprofit organization that tracks educational funding. Experts suggest that by 2006 four years at Northwestern or Harvard might cost as much as $142,000.

What's more, not only are college costs going up, but financial aid is decreasing. The Federal Government's Pell Grant program dropped from $5.6 billion in 1994-95 to $5.3 billion in 1995-96, according to a 1996 survey by the College Board. The report also shows that federal, state and institutional aid to students increased $2.1 billion to total $50 billion in 1995-96, but most of the growth was due to additional loans awarded to students rather than grants. Even if President Clinton's proposed tax incentives to help people seek higher education passes, keeping up with the rising costs will be a difficult task. In a letter at the beginning of the survey, College Board President Donald M. Stewart, laments, "Since the mid-'70s, the Pell Grant has lost ground both to inflation and to the rising cost of college--a 37% decrease over 20 years."

Such is the reality for cash-strapped families trying to provide educational opportunities for their children. So what should you do if you want the very best for your child? BLACK ENTERPRISE decided to tackle that question by reviewing the myriad choices parents face on the way to building a sufficient college fund. The universal lesson we've uncovered is, no matter what path you take, the key thing is to start your tuition program today.

START SAVING NOW

Based on the evidence, it's better to face up to the fact that you've got little option other than to stockpile funds and search for wily investments for your tot's college education. Since there's no guarantee that your child will win an academic or athletic scholarship, logic points to the advice of experts like Kalman A. Chany, author of the Princeton Review's Student Advantage Guide to Paying for College: "It is better to save and earn interest on your money than to borrow later and pay interest on an educational loan.

Jonathan and Sharon Reid of Alpharetta, a suburb of Atlanta, understand that logic well. The Reids have a brood of three to fret over, and beginning nine years from now, nine-year-old Brittany will be the first to start moving into a dorm. Brittany will be followed by Jonathan Jr., now six, and Marcus, four. The Reids are faced with the task of amassing enough funds to get all three children through college, while paying their regular monthly expenses--all on Jonathan Sr.'s approximately $70,000 salary as the director of finance and administrative services at the Atlanta Art Institute.

Since there is only one breadwinner in the family, the Reids have adopted a high-risk strategy. They are trying to stay ahead by salting away $350 a month in mutual funds and stocks, which include small companies that have recently gone public, one of the highest-stakes segments of the stock market. Their portfolio consists of shares of the Fidelity Mutual Growth Fund, which they've been investing in for the past four years, and four telecommunications and Internet-related companies traded on the NASDAQ stock exchange. Jonathan, 34, feels these holdings offer very high potential for growth. "I'd rather take the high risk now and then evaluate my portfolio in the next couple of years," he says. In addition, he puts $400 into his retirement account monthly. And the couple plan to use their 401 (k) for college, too.

Such consistent investing will pay off in the long term, says Douglas Hansford, financial consultant at Smith Barney in Beverly Hills, California. "A lot of the college savings game is proper planning," he says. "You have to have the discipline--it's serious money."

So, how much should you be stowing away? The Personal Financial Planning division of Ernst & Young has produced a table to help you determine the amount you'll need for your child's college tuition, whether you plan to invest in one single payment, yearly payments or monthly installments. The table offers projected college costs and assumes those costs will rise at a 7% annual rate and you will earn a 6% after-tax rate of return on any investments you make. For example, if your child is five years old, you would need about $106,996 when he or she enters college, which would require you to sock away $5,346 annually or $452 a month. If you know the projected tuition expenses of a specific school, you can calculate the amount you'll need to save at the Fidelity Investments website (http://www.fidelity.com), which features a college tuition calculator.

After doing the numbers, Claudie and Felicia Johnson of Macedonia, Ohio, figure they'll have to put away about $427 monthly ($5,124 yearly) before they send their five-year-old son, Christian, off to hit the books in 2009. The problem: the Johnsons can't afford the full payments and still meet their financial obligations.

"We didn't have quite as much to start saving for Christian's education, but we wanted to start with something as soon as possible," Claudie explains. A vice president for Cleveland-based KeyBank's Key Private Banking division, Claudie places $100 from his paycheck monthly into the Victory Mutual Fund his company operates. He also says he will keep his 1993 sedan for at least two more years, which he believes will help keep the family's bills to a minimum.

SHAPING YOUR INVESTMENT STRATEGY

After you've calculated the amount you'll need to save, you need to decide where to invest. Over the long haul, the stock market is probably the best place to grow your money fast enough to keep up with rising college costs. Between 1926 and 1995, assuming inflation ran at a 3.22% average annual rate, S&P 500 shares posted a 12.52% average annual gain, compared with 3.77% for Treasury bills, and 5.54% for long-term government bonds. (Smaller stocks were the best performers with a 17.66% average gain.)

Those statistics suggest that stocks or equity mutual funds are the way to go if you intend to grow your savings. The Johnsons chose a mutual fund portfolio mix of 60% large- and mid-cap stocks and 40% international stocks. The Bonds, too, have a strategy. Since they've just recently paid down their debt, Dwayne has been saving for his son's college education by contributing 1%-5% of his salary into the company's stock purchasing plan. He plans to buy the stock as long as the price continues to climb. "We're not able to save aggressively, but we have time on our side because we started so early," explains Leslie.

Remember, investing in stock is a long-term bet, one that is fraught with risk. Indeed, after the current bull market's extended run, we're likely to forget stocks can slip in value on occasion. That's why it's important to have a mix of investments to help diminish the potential volatility of the stock market. The trick over time, experts say, is to gauge just when it's best to be more heavily weighted in aggressive stocks and when it's better to move the gains you've made over time in bonds. What's a good benchmark? That depends on your stomach for the ups and downs the stock market might take.