Help Your Kids Save While They're Still in School

So your resident college student is knee-deep in student loans, tuition, fees and rent payments. But infusing their bank account will drain your own coffers, sapping the funds you have earmarked to save for your upcoming retirement.

Of course you want to help your child with her finances -- it would be heartbreaking to stand aside and watch her flounder helplessly. But with costs rising across the board, doing so without considering the consequences to your own finances would give her a temporary boost while sabotaging your own savings plan. So what are a starving student and a concerned parent to do?

Save! Save! Save!

Even in tiny increments, the contents of your child's savings account will start adding up if she keeps feeding it regularly. Here's how to get started.

The next time you're with your student, take her to the bank to open -- or fortify -- her savings account. (Feeling generous? Throw in a few bucks to sweeten the pot.) From there, your student should plunk a regular amount, even if it's just a few dollars, into savings each week. Make it a routine. If she goes to the bank to cash a check, she can do it then. If she banks online, help her set up an automatic transfer to fire off cash several times each month. The important part of this is to make it a habit, something she doesn't have to think about. Before long, she won't even miss the money.

Once she's reached her short-term savings goals -- that is, when she has enough in her account to carry her through any tough times life throws at her -- she might want to start putting your cash toward an avenue that carries a higher yield: investing. For a student on the go, with little time to study, much less follow stocks, a broad-market index fund or exchange-traded fund is an excellent choice.

For instance, the PowerShares QQQ (QQQ) ETF, which tracks the Nasdaq-100 index, holds shares of tech giants Apple (AAPL) and Google (GOOG), among others. But it also goes beyond high-tech, with other stocks including Starbucks (SBUX). With low costs and built-in diversity, these types of ETFs and their corresponding index funds are perfect for investors short on time or expertise but long on ambition.

But With What Money?

It's true that the college years aren't likely to be the highest-earning period of your student's life -- but they don't have to be a financial bloodbath, either. With a little thought and planning, anyone can manage to generate a little extra cash.

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For starters, there's a part-time job. Most employers in college towns cater to students' schedules, and there tend to be plenty of options: restaurants, bookstores, coffee shops, retail stores, and so forth.

If she's looking for another way to save some cash, she can try hanging out a shingle of her own. Is she a science whiz? Then she can tutor some of her more left-brained compatriots. If she plays a musical instrument, she can book some appointments to give lessons. Does she have lots of random books, CDs, DVDs, and old clothes from her Freshman 15 days collecting dust -- especially in her old bedroom at home? It's time for her to set up an eBay (EBAY) account and start selling.

Speaking of the Freshman 15 ...

Your scholar can save money by making money. But to really beef up her coffers, she'll have to tighten her belt, too. All those dinners out, concerts, and shopping trips add up -- and undo all the progress she made while working long hours.

Instead of dorm-room seclusion, she should be smart about where her money goes -- and creative, too. Does she go out every weekend and spend lavishly on big dinners with a dozen of her closest friends? Instead, suggest that she get everyone together at her place for a potluck. Add that to a little music from your iTunes playlists, and she'll have all the ambience she needs. Who needs Chili's or Bennigan's, anyway?

If she can't make it to class in the morning without a cup or three of coffee, give her the gift that keeps on giving -- a coffee maker. Investing in a $35 coffeepot now will save her hundreds of dollars -- or more -- in lattes from Starbucks.

And finally, if she's a fashionista who thrives on weekly trips to the mall or the downtown boutiques, tip her off to the "One Day Later" plan. If she finds something she absolutely can't live without during a shopping excursion, try leaving the item at the store for just one more day. If she wakes up the next morning and still feels like she can't live without it, go back and pick it up. (Note: This tactic doesn't work nearly as well with a shopaholic, so use or skip this tip accordingly.)

The Bottom Line

The point is, college students don't have to save as much as Bill Gates to make a difference in their coffers. A barista gig here, some CDs resold there, a potluck on the weekends -- it all adds up. So why wait until your kid graduates? Help her start saving today.

Hope Nelson-Pope is online coordinating editor at The Motley Fool. She owns shares of Apple and Starbucks, but none of the other companies mentioned in this article. The Motley Fool owns shares of PowerShares QQQ, Oracle, Qualcomm, Google, Apple, and Starbucks; and has created a ratio put spread position on PowerShares QQQ. Motley Fool newsletter services have recommended buying shares of Apple, Google, eBay, and Starbucks, as well as creating a bull call spread position in Apple.

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