How to Save for Your Child’s College Fund

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Other than buying a house, saving for diploma programs or a masters degree is one of the most expensive things an individual is likely to pay for, especially if they attend an Ivy League college, so it is not surprising that U.S. citizens are carrying a collecting $1.7 trillion, or thereabouts, in student loan debt.

If you want your children to state life with a clean slate it’s sensible, then, to try and remove the burden of student debt from their lives before they are anywhere near college age. Sure, right now you might be concerned with picking out the perfect kindergarten or finding the time to practice adjectives for kids and help them with their spelling, but the time will fly by, and pretty soon they will be filing college applications. Read these guides to college planning to be prepared. The sooner you start saving for their schooling, the more money you will have to help them through college and the less their debt burden may be.

Okay, but how do you effectively save for your child’s college fund?

Work out how much you need to save

First of all, you’re going to want to work out exactly how much you need to save. As of now, the average cost of attending an in-state college is just over $42,000, and four years of an out-of-state public school will cost around $108,080. If your child attends a private school, it could be as much as $150,600, and that’s before you factor in the $46,480- $203,080 for accommodation and meals during their four-year course or the fact that prices are likely to rise 1-2 percent each year.

That might seem like an overwhelming amount, but if you are sensible with your money, it is totally doable, and you need to remember that there are scholarships and other financial packages that may be able to help too. In England, grammar schools are a government-run free alternative to private schools.

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What is the best way to save?

There are a number of options when it comes to saving for your child’s college fund, but what you absolutely should not do is simply place the money you save in a standard savings account where it will gain a couple of percent at best. No, if you want to have any chance of helping your kids through college, you need to invest that money, and below you will find some of the best ways to do this.

529 plans

529 plans work in basically the same way as Roth IRAs. the money you save is tax-deferred and providing your child does use it to pay for their education, it will never be taxed at all, which makes it an attractive option. However, you should compare 529 plans before choosing one as there are associated fees, and some plan providers will charge much more than others.

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Of course, you could just save in a regular IRA., If you want to do this, it is wise to get financial advice first as there may be wider implications if the finances are not used in exactly the permitted way. A good benefit of going down this route is that, should your child not go to college, you can use the tax-free funds to finance your retirement instead.


Coverdell Education Savings Accounts are basically a tax-deferred trust account, however, they are limited to a $2000 annual investment, which means if you want to save more, they might not be the best fit for you. One advantage is that ESAs can be sued to fund elementary school and secondary education costs too.

UGMA and UTMA accounts

Uniform Gift to Minors Act and the Uniform Transfers to Minors Act accounts are accounts that you open in the child’s name. You, as parents, or even the child’s grandparents are simply guardians of the account. Once your child turns 18 they can access the funds to pay for their college education.

A huge benefit of UGMA and UTMA accounts is that you can save an unlimited amount for your child’s education. However, these accounts will be included on the FAFSA which could directly impact upon how much financial aid your child can receive, so you do need to weigh it up very carefully.

Educational Trusts

If you are a high-earner, saving for your child’s future in an educational trust is a very effective way to lower your tax burden while also ensuring that your child’s college education is well provided for.

You might think it’s too early, but the sooner you start saving for your child’s education the better, and with the above information, you can ensure that you do so as effectively as possible.


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