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The Best Time to Start a College Fund for Your Kids

Written by Banks Editorial Team

Updated September 18, 2023​

2 min. read​

As the costs of a four-year degree continue to rise, a college fund could help your children reach their potential in the future if they wanted to attend college.

According to, the average college student spends around $9,580 for tuition each year. This cost is for tuition only at a public university in their state. It doesn’t include expenses, such as books, fees, room, board, and any other expenses. 

With the cost of college so high, it might seem impossible to save enough to send your child to college. In most cases, your child will receive some financial aid, and if you start saving now, you can help offset these expenses. It’s the greatest gift you can give your kids. 

You need more information to make the best decision possible for your unique financial situation. Here’s your guide to saving for your child’s future education needs:

When Can You Start a College Fund?

In some cases, you can start saving for a college fund as soon as you’re expecting a child. However, many programs require personal information about the child, such as full name and social security number, that you can only provide after your child is born. This is because many of the accounts are custodial accounts, which means you’re only in charge of them until the child reaches the age of majority in your state.

Here are some things to consider before opening an account. 

Things to Understand Before You Start a College Fund

It’s an exciting time when you begin saving for your child’s future, but you want to make sure that you find the right account for your needs. Here are a few things to consider before opening an account. 

  • Beneficiary: There are generally two types of account beneficiaries. Custodial accounts make the child the beneficiary, and your kid gets access to funds as soon as they’re old enough. The other type of account makes you the beneficiary, and you can always decide how to spend and invest the funds. 
  • Assess current expenses: Before you start depositing money, you need to evaluate your current expenses. From rent and food to childcare and car payments, you need to know where your money is going now. Of course, some of these items aren’t fixed costs. Your children will start school, and you’ll pay off your car, so it’s always a good idea to assess your expenses regularly. 
  • How much can you invest: You need to invest only the money you feel comfortable not having easy access to for the first 18 years of your child’s life. It’s essential that you don’t put yourself into a financial bind. 
  • End goal: How much do you need to save? The total sticker price for your child’s four-year education will easily exceed $50,000. However, your child will probably qualify for some financial aid. The university you believe your child will attend probably has a calculator to let you explore how much you may need. 

College Fund Options

Here are a few of the most common options:

529 Investment Plans

A 529 plan is a way to save and invest for your child’s future educational needs while lowering the tax obligation when your kid uses the funds. With this type of plan, you keep control of the money until it’s doled out to your children for educational purposes.

Coverdell Education Savings

Coverdell educational savings accounts (ESA) is a savings plan for your child’s educational expenses that the state and not all states offer. You don’t pay federal taxes on the funds when you use them for education and directly related expenses, but your state might hold you responsible for taxes. 

Roth IRAs

A Roth IRA is the way to save for your child’s future. However, the parent must open the account, and the child needs a source of earned income. You can use the funds for any purpose for your kids. It doesn’t have to be college. 

Custodial Accounts (UGMA/UTMA)

Custodial accounts are educational savings accounts where the funds automatically transfer to your child when they’re old enough. The money must be used for college and other educational purposes. You and your child won’t pay taxes on the funds unless they exceed the gift tax laws. 

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