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The ultimate guide to saving for college

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For many parents, sending their child to college is a proud moment. Not only does it open the door to a prosperous future, but it also offers them their first taste of independence as they transition into adulthood.

But college can be costly. In fact, according to the National Center for Education Statistics, the price to attend a four-year college course has increased by 173 percent in the last 40 years. So, it’s important to plan ahead and start saving for college early.
If you’re wondering how to save for your child’s college education, you’ve come to the right place. In this guide, we’ll explore the different types of college saving accounts available. We’ll also give you some top tips on how to encourage your child to start saving for college too.

Work out how much you need to save

First things first, you’ll need to work out how much you need to save. This can make things less overwhelming as it’ll give you a realistic savings goal to work towards. While it’s hard to know exactly how much to save for your child’s education, tuition and fees are a good place to start.

As of 2023, the average tuition and fees for full-time undergraduate students enrolled in a public four-year in-state course are $10,940. Of course, exact figures will vary depending on the type of school (e.g., in-state college vs. Ivy League university) and the length of the program. You’ll also need to factor in inflation too, as a couple of years from now, the fees are likely to be higher.

The different types of college saving accounts

Once you have an idea of how much your child’s chosen institution and course will cost, you can start saving for college. But first, you’ll need to decide which saving account is right for your savings goals. We’ll explore some of the different types of college saving accounts below:

Education Savings Accounts (ESA)
An ESA or Education Savings Account is designed to encourage savings for future educational expenses. It allows you to invest up to $2,000 (after tax) per year, per child. And the best part is, your money grows tax-free, and you won’t have to pay tax when you withdraw the money either.

An ESA isn’t just for college tuition. It can also be used to pay for things like textbooks, supplies, and private tutoring. And if your child decides they no longer wish to go to university, you can transfer the account over to a sibling instead. However, the account must be used by the beneficiary before they turn 30 and you must ensure you meet the income limit to qualify.

529 Plan
If you want to set aside more than $2,000 per year for your child’s college education, or if you don’t qualify for an ESA, you may want to consider a 529 plan instead. Most of the time, 529 plans don’t have any income limits. However, avoid any prepaid plans that freeze your savings or automatically alter your investments based on your child’s age.

Similarly, to an ESA, a 529 plan isn’t just for tuition fees, it can also be used to pay for other educational expenses. Some 529 plans even give you the option to transfer the funds to another family member. But, restrictions may apply and not all plans allow this.

Again, once the money is in the account, it grows tax-free. However, if an individual contributes more than $17,000 per year or $34,000 for married couples, the funds will be subject to gift tax.


A Uniform Transfer to Minors ACT (UTMA) or Uniform Gift to Minors Act (UGMA) differ from 529 and ESA plans as they aren’t just for saving for college. The account is held in the child’s name, but it is controlled by a parent or guardian until they reach 18 or 21 (the age varies by state).

Once the child is of legal age, they’ll be able to control the account and use it as they please. So, while you may open a UTAM or UGMA to invest in your child’s educational future, they’re the ones who ultimately get to decide how the money is spent.

Unlike an ESA, there are no limits on how much you contribute, however similarly to a 529 plan, anything over $17,000 per year, or $34,000 for married couples, will be subject to gift tax. It’s also worth noting that, once the account has been opened, the beneficiary cannot be changed.

Empower your child to save for college

While you may feel like you are responsible for your child’s education, it’s not just up to the parents to pay for higher education. There’s no reason you can’t encourage your child to start saving for college. Sometimes, it can be just as empowering for your child to take ownership of their own future. It can also teach them healthy money habits that they’ll carry into the future. Here are a few ideas to get them started:

Apply for a scholarship

Scholarships are a form of financial aid that is awarded to students for further education. Generally, they are based on a child’s academic and other achievements. Scholarships don’t need to be repaid, which makes them a good option for students who require financial assistance.  There are many different types of scholarships, each with their own set of rules and requirements so it’s worth doing some research to figure out which is the best fit.

Apply for financial aid

If your child is thinking about attending college, encourage them to fill out the Free Application for Federal Student Aid (FAFSA) form. The FASA form can be used to apply for financial aid for college. Just be mindful that the FAFSA also shows how much your child can borrow in student loans, which eventually they’ll have to pay back.

Get a job

Whether they get a part-time job during school, or a full-time gig over summer, encouraging your child to get a job helps them when they’re saving for college. There are plenty of opportunities out there, from tutoring to dog walking. It’s also a great way for them to gain work experience and build their resume too.

Get serious about saving

It’s never too early to start saving for college. Giving them the best future starts with careful planning. However, it’s equally as important to remember that not all families are in a position to save for college, and that’s more than okay. Applying for financial aid and encouraging your child to get a job can also benefit their future in the long run.


How much does the average person save for college?

On average, parents save around $5,507 a year for their child’s college education. However, figures can vary by saving account. Income levels can also affect how much families can set aside for college.

What is the best college fund?
The best type of college fund will depend on your needs. There are many options out there, so it’s important to do your research. However, 529s and ESAs are considered good options because of their tax advantages.

What if I can’t afford college?

If you can’t afford college, don’t worry. There are a few options that could help. Scholarships can help you pay for college, as unlike student loans, you don’t have to pay them back. If you need money to cover your college expenses, you can also apply for financial aid.

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