How to Save For and Fund Your Child’s Education

There’s no doubt that it’s expensive to send a kid to college. Unfortunately, the costs only figure to rise over time. If you have a child who’s heading off to college in the next few years, it can be very stressful to think about. You can expect to pay anywhere from $10,000 to $40,000 a year, and that doesn’t include living expenses. 

The question is, how do you do it? How are you going to save for their education while also paying your bills and keeping food on the table? it is doable, but it will take some commitment and knowledge. Here’s how you can save for and fund your child’s education. 

In the library – Aisian female student with books working in a university library.

Have a Plan

The first step is having a plan. This should be the case whether college is a year away or 18 years away. Come up with an estimate of how much it is going to cost for your child to go to college. If it’s still many years off, then you can make a best guess based on how much tuition has gone up in recent years. 

Then figure out what strategies you will use to pay for it, such as saving a percentage of your monthly check. There are also loans and financial assistance. Use tools such as a parent PLUS calculator to gauge how much you will pay for loans and how much it will cost monthly. 

There’s No Time Like the Present

There’s no time like the present to get started. No matter if your child is years away or headed to school in the fall, the time to start saving and planning is now. Saving now will prove to be a great benefit, since you’ll take advantage of compounding interest throughout the years. Even if you start with a modest sum every month, such as $50 a month, you’ll see the growth over time. As your circumstances change, you can adjust that number to more or less. 

It’s also important to be consistent. Do not miss a month, and even put it additional funds to try and get as much as possible. Another strategy is to pay more upfront into your education plan. For example, if you’re paying into a 529 plan, you can make five years worth of payments all at once. 

529 Plan

A 529 plan is a state college savings plan. They work by the contributor investing in the stock market and get the returns over time. Any growth is tax-free, and anything you use towards education is not taxed. You can deduct the contributions from your taxes, however be sure to take note of any restrictions. One thing to also note is that if the funds are not used for education, then they can be taxed. Therefore, you don’t want to save too much. It’s a balancing act. 

Coverdell Education Savings Account

The Coverdell Education Savings Account (ESA) is an account that you pay into over time. They are not tax deductable, but the account will grow over time and you do not have to pay taxes on that growth. When you use the funds in the account for education, then it is not taxed either. However there is a limit of $2000 annually, and people over a certain income do not qualify. 

Prepaid Tuition Plans

Prepaid tuition plans are a kind of 529 plan. However, there are restrictions to using one. For instance, they can only be used for tuition. Things like room and board, food, and books are not included. Along with that, they are only valid if used to pay for state schools. If you use the funds for other schools or purposes you will incur hefty penalties. 


You can save for college, and you can invest funds to pay for college. When you save money, you put it into an account and watch it grow. However, it doesn’t grow from interest very quickly. However, if you were to invest wisely, you can achieve fast growth that will yield great results. However, there is always the risk that your investments won’t do so well. 

Keep an eye on your investments. Every year track how they are doing and make changes if need be. If you can, hire a financial planner to give you advice and guidance for your portfolio. A year or two before they are going to go, cash in enough to pay for the first year. Put it in a money market fund so that it is safe until it is ready to be used. 

It can be demoralizing to look at the cost of going to college and realize that you will have to pay for it down the road. However, by getting started early and having a plan, you can be well ahead of the game when the time comes to fund your child’s education.