BUILD COLLEGE FUNDS WITH INVESTMENTS (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

College costs have risen rapidly in the past decade. Even if these increases level off somewhat, today's toddlers could easily face a $100,000 bill for four years at a public college and twice that amount for many private schools.

If you're a parent, you may wonder what you can do to save that kind of money. Fortunately, the situation is not as ominous as you might think. In the first place, colleges and universities often award generous financial aid packages, and a wealth of scholarships are available. Also, you can find some investments are particularly suited to saving for college. Let's look at a few:

* UGMAs/UTMAs -- The Uniform Gift to Minors Act and the Uniform Transfer to Minors Act are two commonly used "custodial" accounts. When you establish an UGMA or UTMA, you give your children or grandchildren a gift of cash, stocks, bonds or other securities. They own the financial asset, but you, as custodian, manage the account. When children reach the age of adulthood -- which varies by state -- they take control of the money.

Your UGMA/UTMA contributions are irrevocable. Once your children become adults and take control of the money, they are free to do whatever they want with it -- and their plans may not even include college.

* Zero-coupon bonds -- When you buy a "zero," you receive a discount from the bond's face value. The actual size of the discount depends on the type of bond -- corporate, Treasury or municipal -- and the bond's maturity. Generally speaking, the more years you have until the bond matures, the bigger the discount you'll receive. For example, if you purchase a zero-coupon $10,000 Treasury bond that matures in 10 years, you may have to pay only around $5,100. In return for this discount, you receive no periodic interest payments on the bond. When the bond matures, you will receive the full face value. You can time your bond's maturity to the year when you will need the money for college.

The interest on your zero-coupon bond will be taxable each year, even though you don't receive the money until the bond matures. That's why you might want to put your zero-coupon in a tax-deferred account, such as an IRA, from which you can make penalty-free withdrawals for college.

* Growth funds -- "Growth" mutual funds also can be good college-savings vehicles. By investing in mutual funds, as opposed to individual stocks, you receive the benefits of diversification and professional management. As with all stock-based investments, however, growth funds fluctuate in price. Therefore, you may want to consider "locking in" any gains you've earned by selling mutual fund shares several months before your child heads off to school. You can then put the funds in a short-term, fixed-rate instrument until you need them.

An investment representative can help you explore all your options for saving for college. But one thing is certain: The earlier you start planning, the more doors will be open for you.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.