Survive This Economy: Saving For Your Kids' College Tuition

CHICAGO (CBS) -- Trying to "Survive This Economy" and pay for your kids' college education has become tougher than ever in recent years.

If your children are in grade school today, and choose to go to private college, by the time they enroll, they'll have to pay nearly $400,000 to get a degree from the average private university.

CBS 2's Dorothy Tucker brought expert help to one suburban family, and had a look at a popular educational savings plan.

When Tierney Wright goes to college in five years, she will need about $260,000 if she wants to go to a private four-year college. By the time her 7-year-old sister Autumn graduates high school, she'll need $375,000.

Their father, Marcus, said he hopes the girls will get scholarships, but he also wants to contribute as much as he can.

"The cost is increasing, so if you don't prepare, then you're going to put yourself in a really bad situation," Marcus said.

That's why the Wrights are looking to invest in a "529" college savings plan. It's a bit like a 401(k) retirement plan, offering a mix of stocks, bonds and mutual funds.

In Illinois, the state's "529" college savings program is called "Bright Start."

College planning expert John Grouleau, at CBS 2's request, has been helping the Wrights balance the pros and cons of such a plan.

"The good news is that, if you use it for college expenses, it will grow tax-free," he said.

Plus, to help pay for college, you can contribute as little as $25 a month. Also, if the oldest child in your family gets a full ride to a university and doesn't need the money you've put into the savings plan, Grouleau said, "you can change the beneficiary, and use it for your younger [child]."

The cons include hefty taxes and penalties, if you withdraw the money early.

"Another disadvantage is that there are no guarantees. If the market goes up you'll be happy. If the market goes down, you're not going to be happy," Grouleau said.

If Marcus contributes just $25 a month, and gets a 5 percent return, he'll save about $4,200 for Autumn's college fund, and $2,400 for Tierney's college fund. It's not enough to pay their tuition, but it could help cover books, fees, and related expenses.