Chapter 02: How to Start Saving for College

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So now that you’ve learned how to calculate the cost of college tuition in Chapter 1 of this series, it’s only natural that now you’re focused on saving to be able to afford it. In Chapter 2, we’ll go over some of the steps to start saving for your child’s college fund and how to save for college over the next few decades.

College costs have been increasing for years. As a parent, this may spark some worry about your child’s financial future. You want them to establish good money management habits like building credit and avoiding debt, but with so many financial hurdles, the prospect may seem insurmountable.

The good news is that with some proper education and planning, you can start a college savings and set your child up for a quality education that won’t break the bank. Keep reading to learn how to save for college using a well-planned strategy or use the links below to go to the section that best answers your question.

Anticipate Your Savings Needs

If you attended college, you’re no stranger to the onslaught of expenses that come with a diploma. Books, computers, and organization fees are all things to consider on top of tuition, room, and board. Since most of these expenses are to be expected when saving for college, you should factor them into your plan accordingly.

Decide When to Start Saving for College

If you don’t want your child to go through life carrying a significant amount of student debt, the sooner you start saving for college the better. If you don’t yet have children, or if your children are very young, time is on your side. The key is saving early and saving regularly.

You can even get creative with deciding when to start saving, like a special occasion. One creative way for how to save for college is to consider asking for college money in lieu of traditional baby shower gifts. Your guests will likely feel good about getting to invest in your child’s future.

Estimate the Cost of Tuition and Living Expenses

Before executing a savings plan, get a sense for how much you’ll need to save. Take into account living expenses — will your child stay at home at all, or will they move out? Compare costs of dorm living versus apartments close to campus.

A good way to gauge how much you should have saved for tuition is to multiply your child’s age by $2,000. For example, if your child is five, you should have roughly $10,000 saved to be on track to cover about half the cost of an in-state public university by the time they are 18 (if you’re investing the funds). The rest of the cost may come from family earnings or scholarships.

Start a Savings Fund

Now that you have set expectations on when and how much you need to save, it’s time to decide how to save. Choosing the right savings vehicle for your family is key to setting yourself up for financial success. Do some research into the following types of college funds, and don’t be afraid to consult a financial advisor if you have questions about saving for college.

Note that we’ll cover each type of savings vehicle in greater detail later in this series, but here is some basic information to get your wheels turning about which might be the right avenue for you.


An Education Savings Account or Education IRA is an investment fund that allows you to contribute $2,000 per year to save for college. The funds may grow tax-free, and must be used for educational expenses. Two things to watch out for with ESA’s include checking if you fall within the income limit and making sure the beneficiary uses the funds by age 30.

529 Savings Plans

A 529 College Savings Plan is an investment fund that allows you to save much more aggressively. Things to look for when choosing a 529 plan include a variety of investment options and beneficiary flexibility in case your child decides not to go to college. A 529 plan is also a good option if you don’t meet the income limit for an ESA.

Savings Bonds

Backed by the “full faith and credit” of the United States government, series EE and I savings bonds offer tax-advantaged ways to save for college. Like ESA’s, you must fall within an income limit. Savings bonds are usually exempt from state and local taxes if used for qualified higher education expenses.


Uniform Transfer and Uniform Gift to Minors Acts (UTMA and UGMA) are different from other college savings funds in that they don’t need to be used for qualified educational expenses. Once the beneficiary reaches the age of majority, she can use the funds for whatever purpose she chooses. There are still tax advantages for the contributor, but keep in mind that unlike other options, the beneficiary cannot be changed once selected.

Get Your Child Involved in Saving for College

Include your child in the process of funding their own education. It will help teach them the value of money, and they will likely appreciate their education more knowing they helped make paying for college possible. Once they’re old enough, consider the following approaches.

Enroll Them in AP and Dual-Credit Classes

High schools are becoming increasingly focused on college preparation, so take advantage of everything they have to offer. AP and Dual-Credit classes allow your child to fulfill the necessary high school requirements while simultaneously earning college credit — and the more college credit you can accumulate beforehand the better. This will ensure your student graduates on time, which is key if tuition money is tight. Make sure to check with their choice universities to see which AP scores they accept.

Emphasize Saving over Spending

If your child gets a part-time job as a student, encourage them to save first and then spend what’s left. While they’re still living under your roof their expenses are minimal, so this is an optimal time for them to build a strong savings foundation. Teach them the importance of having an emergency fund in case something happens once they become financially independent.

Help Them Apply for Scholarships

Finding and applying for scholarships is hard work, but it pays off. While only a small percent of college students receive enough financial aid to fully cover the cost of college, anything helps to supplement your college savings fund. Once you’ve exhausted scholarship opportunities, consider federal aid like the Pell Grant.

It’s never too early to start saving for college. By estimating your child’s education expenses, regularly contributing the right savings fund, and involving your child in the process along the way, you’ll give them the money-management tools they need for success.

Plan for their Future Now

As you can see, there’s a lot to consider when you’re trying to start saving for college while your kids are young. The best way to save for college will depend on a variety of factors like your financial situation, what type of college you are aiming for, and how long you have to save. 

Keep reading our saving 4 college series to learn more about how to strategize how you save for college and start making a plan. Chapter 2 will provide more insight into taking the next steps for starting a college fund, including when the best time is to start one and a bit more information on the types of college savings accounts available.


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