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Automatic savings, tax credits and deductions, dorm alternatives

It Adds Up

My husband and I have three daughters, and each of them has her own savings account. We deposit $10 into each account whenever we receive a paycheck, a rebate check or any other kind of check and keep the balances between $500 and $700. When the balance hits $700, we send $200 to our 529 college-savings plan (and send additional money whenever we can). Although our oldest child is only 5 years old, we already have $19,000 saved for college. -- Kate Stapleton, Aurora, Col.

KIP TIP: If your state offers residents a tax deduction for contributions to its 529 plan, start there. If not, we like College Savings Iowa for its low fees and attractive investments (for more on 529 plans, go to Kiplinger.com).

50 WAYS TO SAVE

Budgeting and Saving

Retirement

Travel and Cars

Spending

Coupons for College

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For the past 15 years, my wife and I have stashed the money we save with grocery coupons and rebates, $50 to $75 per week, into our two kids' college funds. When our elder child headed to Georgia Tech last fall, he had more than $60,000 in his account. -- Jeffrey Fischer, Roswell, Ga.

KIP TIP: Share college tuition costs with Uncle Sam. If you're married and your joint income is less than $110,000 (or less than $55,000 for everyone else), you may qualify for a Hope Scholarship tax credit of up to $1,650 per student or a Lifetime Learning tax credit up to $2,000 per household in 2007. If your income is higher, you may still be able to deduct up to $4,000 in qualified tuition and fees.

Dump the Dorms

When our twins finished their first year of college, I took $10,000 from their college fund and bought a small three-bedroom house. The mortgage payments were less than the dorm or an apartment would have cost for the two of them. They had a third roommate who paid rent, and they saved money on food and laundry. We also had a free place to stay when we visited. When they graduated three years later, I sold the house on my own for $6,000 more than I paid for it. Altogether, I figure we saved about $15,000. -- Joe Marino, Dunlap, Ill.

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KIP TIP: Attending a local community college for a year or two before transferring to a four-year university can save tens of thousands of dollars. So can graduating in three years by combining high school AP classes with extra college courses. ROTC scholarships can wipe out tuition costs even at some elite private institutions.

Bank One Salary

Every morning I load my two kids on the school bus at 8:15, allowing me to get to work by 9 o'clock and leave by 3 p.m. By working around their school schedule, I don't pay for child care. We live on my husband's salary and bank all of my income, dividing it between our savings and their two college-savings plans. -- Andrea Hall, Alexandria, Va.

Cut the Fees

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I originally set up 529 college-savings plans for my two children through a broker, but then realized the fees were too high. I'm planning to switch to a direct plan targeted to New Jersey residents like myself. It has lower fees than the broker-sold plan. The added sweetener of a scholarship of up to $1,500 to each beneficiary is enough to make me switch. -- Bob Murdoch, Brielle, N.J.