Saving for College? The Key Is Getting Started Early

Every parent admiring a newborn child dreams of seeing their baby succeed in life. For most, that vision includes a college degree and the many career and life options it offers the graduate.

But, as we all know, caring for children from birth through high school graduation is expensive. On the average, today’s parents will spend at least $300,000 to raise a child from birth to age 17, according to the Brookings Institution. It’s not surprising, then, that for many parents (and even grandparents) the dream of giving a child the gift of a debt-free higher education gets sidetracked by handling the daily necessities of diapers, formula, school lunches, braces, youth sports, transportation, prom gowns, and all the rest.

As with most important financial endeavors, however, the key to success in funding higher education expenses is having a plan in place as early as possible. And such planning is all too rare, according to a recent survey by financial self-help site about 1 in 5 families (20%) say they want to save for the kids’ college costs, but they haven’t done anything about it.

Here are some ideas that can help parents and other concerned family members get started early on funding higher education expenses.

1. 529 plans. These tax-advantaged plans are offered by most states. Funds deposited grow tax-free until they are needed for qualified educational expenses, which now include tuition for private kindergarten, elementary, and secondary schools in addition to college. Plans vary from state to state, including the investments available. Most plans allow changes to the beneficiary, however; if a child decides not to attend college, the funds can be re-allocated to a younger sibling or even a parent seeking further education.

2. Roth IRAs. Though typically targeted for retirement, funds in Roth IRAs can, in some circumstances, be utilized for qualified educational expenses. However, contributions are limited to the earned income of the account beneficiary, so unless the child has actual earnings to contribute, it is often a parent or grandparent’s Roth IRA that will be the source of the funds. Though most retirement account withdrawals are subject to penalties for withdrawals before age 59 ½, an exception exists for Roth accounts that are at least five years old at the time of withdrawal when the funds are being used for qualified educational expenses.

3. Regular savings over time. Even if you don’t open a 529 or Roth account, you can still make a big dent in a child’s college costs if you start early and maintain a disciplined schedule of deposits to an account. The key is giving yourself the maximum amount of time for the funds to compound and grow. Some parents also cultivate the habit of allocating “bonus” income to the education account: tax refunds, a portion of salary increases, birthday gifts, and the like. Also, as childcare costs decrease (for example, when the child “graduates” from paid preschool to public school kindergarten), many parents will continue “paying tuition,” except that now it goes into an education savings account. Any way you can cultivate the habit of systematic savings—amplified by the occasional “windfall”—will put you ahead when the day comes to start paying college tuition and fees.

At Empyrion Wealth Management, we specialize in helping parents and grandparents plan for education funding. To learn more, click here to read our recent article, “The Evolution of 529 Plans: Tips for Parents and Grandparents.”


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Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.