How Do You save for Your Children's College?

Updated on October 14, 2011
A.D. asks from New York, NY
15 answers

My son is 3. I don’t want him to have to pay for college like I had to (still am!).
How do you save for your children’s college? Do you have a regular savings account for them and you put a set amount in each month, or is there a better way?
I need to start moving on this and I have no clue where to start…
TIA wise mamas!

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answers from Philadelphia on

i help her become a genuis so she can get scholarships...i'm still paying mine and a single parent so yea my method is to teach her to spend wisely, get a scholarship and if not go to a cheaper school the 1st 2 years, get awesome grades and then go to the awesome school. I hope to start saving in a year though and putting 100 a month into a college acct.

4 moms found this helpful

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answers from Miami on

Dear Adriana,

I am a financial planner - I do not recommend either pre-paid plans for 529 plans for families with only one child. The reason is that using either of these types of plans results in huge penalties if you do not end up using the monies for higher education expenses. The reality of life is that not everyone goes to college! So, I look at opening a pre-paid plan or a 529 plan like putting all your eggs in one basket when you only have one child. If you have a second child, then it becomes a much better proposition statistically speaking.

I want you to know that I practice what I preach. I have a 5.5 year old and a one year old. We saved money for my 5.5 year old in both a traditional savings account and an investment account for him from the time of his birth. These accounts will be his when he is 18 and he can do what he wants with the money. Truly, it was his to start with: gifts of cash along the way. When my second was born, we opened both a savings account for him and an investment account as well as opening a 529 plan with my first born as the "beneficiary". My underlying assumption is that at least one will go to college.

I would also suggest that you max out your retirement savings before you save for college. While this is not intuitive to most parents, you can borrow for college and there are not any loans available for retirement.

Feel free to message any questions directly to me.

5 moms found this helpful


answers from Chicago on

Honestly I won't pay for all of my kids college costs. I was a resident assistant at a private university and most of the kids that had their school paid for did not appreciate it, and messed around and did not get the education their parents were paying for. Not all of them but a very good majority. I have also seen this within my own family.

Those of us that had to pay for it on our own worked damn hard to get the best education that we were paying for.

That being said, I will help them out, but they are getting jobs, loans, and working for their education. I just try to put away a little from each paycheck so they will have something. I started out small just $10 from each paycheck, and slowly increase it so it doesn't hurt too bad.

4 moms found this helpful


answers from Boston on

Look into what your state offers. All states offer a 529 plan. A 529 plan allows you to make periodic contributions into a tax-advantaged account that can later be used to pay education costs. The federal tax advantage is that while you can't deduct your contributions, the money grows tax-deferred and when you begin withdrawals from the plan to pay for school, those are federal-tax free. If the beneficiary you name ends up not needing the money you have saved, then you can transfer it to another beneficiary (including your spouse or yourself if either of you have education expenses later on) or you can withdraw the money and then pay income taxes on your earnings (but not the amount that you contributed because that was already taxed) plus a 10% penalty because the money isn't going towards a "qualified" education expense. In some states, if you go with the plan that your state sponsors then you can get a break on your state income taxes. If that doesn't apply, then you can go with any 529 plan. I would choose a large, reputable company like Fidelity or Vanguard, or if your employer offers a plan, use that one as you may get a better share class on your investment, lower costs and automatic contributions via payroll deduction. You can choose an investment portfolio that gets more conservative as your child gets closer to the year you anticipate needing the money that you have saved.

Some plans also offer a pre-paid tuition plan for in-state, public schools. Each state's plan varies but basically, the plans work really well for keeping down the future cost of school but if the child decides to go to a public or out of state school, you can still use your savings towards that school like a traditional 529.

Good for you for looking into this - a little savings over the years can go a long way, and if you have an account open, you can give the account number to any relatives (grandparents!) who want to give your children financial gifts and they can make deposits directly into the accounts. Also, 529 plans do count as parent assets in the financial aid process, but right now they max out at 5.64%. So if you saved $20,000 in a 529 and applied for federal financial aid, your aid eligibility would only be reduced by $1128 (5.64% of $20K).

4 moms found this helpful


answers from Dallas on

We have an only child (16, girl) and she is fully funded at this point. Kudos to you for thinking about this and making plans to properly educate your child.

We have been diligent since day 1 and had specific early goals. We do have a 529 but she's also well diversified with the money. On the 529, if she does not use it all, then she can use it to start her children's funds.

It take a lot of self discipline, delayed gratification and work. We anticipate her 4 yrs to cost around $250,000 including a study abroad plan.

I am a huge supporter of parents funding their children's education. Why would you not provide the best you can for your child?

It is important to fully fund your retirement as well. Yes it's hard but it can be done. Living debt free and below your means is also wise.

In our family... No college is not an option. My daughter would never consider that. We are financially sensible, high achievers and believe in helping our daughter start her adult life out of debt.

Check with your financial advisor for guidance if you are insure of what specific routes you need to take to make your college savings have greater earning potential.

Also 2nd what Pam has to say.

3 moms found this helpful


answers from Kalamazoo on

We asked relatives to consider giving the children small amounts of money, instead of trinkets at various holidays (we were getting overrun with small toys), which we would then invest for them, for their future education. Most were happy with this idea, and often send a book or something similar with a small amount of cash. Every dollar adds up and we're no longer overrun with 5 new stuffed bunnies every Easter etc.

3 moms found this helpful


answers from Cincinnati on

We started a 529 after he was born. In addition, I opened an ING Orange savings account in his name when he was just a few months old. I like to deposit whatever cash gifts he receives for holidays/birthdays there.

2 moms found this helpful


answers from Naples on

$25 a week automatically gets moved over from our checking account into a savings account for his college. The bank does it automatically. It's easy to set up. I highly recommend this method!

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answers from Cleveland on

Good for you! There was another recent question about whether it's a parent's obligation to pay for college and some people say if you pay for your child's college, they don't value it as much. I think it's very unfair of people to make generalizations like that. Most people I know had college or most of it paid for and they weren't ungrateful and very much value their education and often the big sacrifices their parents made to significantly help them. It's how you raise your kids that dictates if they're ungrateful or not. I always knew my parents put my needs ahead of their own and I never took advantage of that and always have been very appreciative. I think kids often act out when they see their parents being selfish. But that wasn't your question. A 529 plan seems to be a good idea unless you're very active in money management and think you can do a better job yourself and offset the tax savings. We use Utah's plan bc it got good reviews and has lower fees. In terms of how much, it depends on what kind of college you're thinking - state versus private. Private school with room and board is now about $50k a year I think. There was another recent question on that. So once you figure out how much money you'll likely need in 15 years, then you can figure out how much to save. To be really conservative, I assume that the investment gains will be somewhat offset by tuition inflation. It used to be people way out earned inflation in the stock market but that hasn't been the case recently. So you never know. And then I would look if you can put in a lump sum now to get off to a start and/or make monthly contributions in line with what you want to fund vs what you can afford.

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answers from Los Angeles on

Look into a 529 Plan. It's a savings account specifically for college, I think the benefits vary by state. We have asked family to make small contributions on a monthly basis for our son. So my mother-in-law contributes $50/month which she sends directly to his 529 Plan. My parents contribute $35/month, my sister contributes $20/month, her long-time boyfriend also contributes $20/month - they all set up automatic payments via PayPal to be paid to me then I transfer it to his 529 plan. We contribute $50/month. So in total there's $175 per month going to his college fund without it being a huge burden for anyone.

2 moms found this helpful


answers from New York on

The best advice I received came from my financial planner. Get yourself a financial planner. There is usually no charge for the first consultation. There are many ways to save. You have to figure out what is best for you and your family.

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answers from Austin on

To give you an idea. We really tried to save 200. per month.. we knew it was not much, but it was what we could do. We also totally paid off our home. We did have to dip into this savings sometimes.

Then my mom purchased a 529 plan for $3600 the first year it was offered here in Texas. That was 14 years ago.

Our daughter is attending college out of state. The first year the 529 paid
$5600. The second year, $6200, last year, $6800. and this school year $7200.

This is JUST for Tuition. So for $3600. They will have paid out $24,800.

I think it was a good choice for us..

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answers from Cleveland on

we have a savings account for her that we put money into whenever she gets any money at all and all change goes into her piggy bank at home and every couple months i roll the change and it gets put into her account, right now its at 1000 and she is 2 and we will keep doing this and once she is in school we will put money into it each pay so it builds and hopefully will pay for most of her college

1 mom found this helpful


answers from Richmond on

When my girls were in preK, I put minuscule amounts of money aside for college... which I drained about 2 years ago when we were both unemployed :( SO, they better get some scholarships, right now, it's not looking so hot!

1 mom found this helpful


answers from Tampa on

I opened FL Prepaid accounts for both of my children as soon as they were born. I pay a monthly payment at the tution rate at the time of their birth and they will be able to go to any FL state university when they turn 18. I will not have to pay anything else for their tution...

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