Financing your child’s education

Q: I purchase bonds for my daughter, who turned 11 on July 27. I invest 10% of what I make in her mutual fund. I need to know, should I be saving more?
–Lydia Turner,

A: As a part of our Black Wealth Initiative, we have encouraged our readers to save 10% to 15% of their after-tax dollars. Probably the best way to start saving is through your company’s 401(k) plan. You can save on a tax-deferred basis and the maximum allowable is $10,500.

However, before maxing out your 401(k) contributions or becoming a more aggressive investor, set aside some contingency funds in case of emergencies. Financial planners suggest that you sock away as much as three to six months of income.

Once you have secured short-term needs and long-term retirement goals, then you can develop a more comprehensive savings and investment program for your child. In order to effectively meet the needs of your child’s college expenses, it pays to get some insight from a financial advisor or professional in the field.

It seems like you are off to a good start in terms of the amount you have started investing. Since your child has a few years before she attends college, you can invest in growth stocks and mutual funds that will provide you with some ample returns. However, make sure that you diversify your portfolio, whether you decide to invest in mutual funds or individual stocks.