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A Guide to Saving for Your Kid’s College Education

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Updated September 18, 2023​

2 min. read​

If you want your children to go to college without taking out a student loan, you may need a saving plan for college. According to U.S. News, the cost of sending a child to college in the 2020-2021 school year was $11,171. This is per year at a public university in your state. By the time you pay for books and other odds and ends, you can expect to pay more than $50,000 for your child’s education. 

With such a high cost, a college education for your child is possible if you make the best financial choices now. You need to learn more about various savings plan options to make an informed decision and set your kid up for success. Here’s your guide to saving for your kid’s college:

Why Should You Save Money to Send Your Kids to College?

With the costs so high, why do you need to save for your child’s college? With a four-year degree, your child will earn around $750,000 more than someone without one throughout their life. 

While you expect your child to receive some financial aid, this money rarely covers the money it takes to graduate. By saving, you can help offset your child’s education expenses. 

Saving Money for Your Kids’ College

Before you can start saving money for your kids’ college tuition, you need to select a savings plan to get started. There’s a diverse selection of choices. Here’s a look at a few of the popular options for you to consider:

Savings Accounts

A savings account is a traditional and safe way to save for your child’s education. You may think that you won’t earn much interest, so why bother? Actually, if your child is young, you can save some serious money over the next decade or more while they grow up. Also, you don’t have to use the money for education if your child decides not to go to college. 

College Savings 529 Plans

A 529 plan is a solid way to invest money and build an education nest egg for your kids. While you’re saving money for your child in this fund, you won’t pay taxes on any money the account earns as long as you use the funds for educational expenses. The funds can be applied to any or all of your children’s education costs. In some cases, you can use the funds for educational expenses before college. 

What People Ask About Saving Money for College

What Percentage of Your Income Should You Save for Your Kid’s College?

This is a tricky question to answer. Your financial situation is unique to you. The goal is to save as much as you can without placing yourself and your family into financial jeopardy.

How Much Money Should You Have Saved By the Time Your Kids Are 18?

First, you probably won’t pay the total amount for your child to go to college listed on the university’s website. Your child will probably get some sort of financial aid. You can use the college cost calculator on the university’s website to get a realistic expectation on how much you need to have saved.

What happens to a 529 Plan If Your Children Do Not Go to College?

If you use the funds in a 529 plan for anything other than education expenses, expect to pay federal and state taxes on the money. Also, you’ll pay a 10% penalty.

Is Saving for College Worth It?

Yes, if you can offset the cost of college for your child, you set them on the path to earning more money without the need to take out as many student loans.

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