Starting a college investment program when your child is 16 or older does not give you the benefit of long-term growth. Any college-funding investment program should be started when your child is young and should have a long-term focus. Your investment objective should be for growth in an effort to stay ahead of inflation.

In setting your objective, make sure you take into account your risk profile. That is, how much risk are you willing to take? Think of investment and risk as running across a spectrum, where investments with low risk are at one end and high risk at the other. With lower risk investments, safety of principal and minimal or no fluctuation in the value of your account is critical. As a trade-off, you are willing to accept a lower rate of return. Your tolerance for risk is usually lower when your time horizon is short-term. Typical low-risk savings vehicles include passbook savings accounts, certificates of deposit, and Series EE and Series I Bonds.

With higher risk tolerance, your goal is growth in your portfolio. You are seeking higher returns. You are willing to accept greater volatility over the short-term because your time horizon is long-term. Typical investments are growth stocks, international stocks and real estate.