Four College Saving Strategies for Parents

Date: May 29, 2018

Paying for a child’s education is an expensive endeavor. Per the College Board, the average annual cost of tuition and fees during the 2016-2017 school year was $33,480 at private institutions and $9,650 at public colleges and universities. Those numbers have been rising steadily for decades (yes, decades), and while parents admittedly have little control over that trend, there are strategies they can utilize now to prepare for high tuition bills in the future.

Plan Ahead

A 529 plan is a state-sponsored investment account designed specifically to help parents pay for college. They come with some serious tax advantages:

  • Most states will deduct contributions each year.
  • Taxes are deferred on earnings.
  • You can withdraw from the account without penalty so long as the money is used to pay for higher education expenses.

A Roth IRA, on the other hand, is a savings plan typically associated with retirement, but the assets of these accounts can also be used without tax penalty for the purpose of paying for college. A Roth IRA also offers some flexibility in that if a child does not attend college, those savings will still be available, tax- and penalty-free, when the parent retires. There are restrictions, however, to how much and when individuals can contribute. A good financial adviser or tax accountant can weigh in on whether a 529 plan or Roth IRA is the way to go.

Save Smartly

Parents don’t necessarily have to deprive themselves of nice things, but they should look at all discretionary income as potential college savings … starting now.

“Redirect windfalls and cost savings into college savings,” Mark Kantrowitz, publisher and vice president of strategy at, suggests in an interview exclusively with The Score. “When the baby no longer needs diapers or daycare, redirect the money you otherwise would have spent into college savings. If you get an income tax refund, bonus, raise or inheritance, use that opportunity to make a lump sum contribution to the college savings fund and to increase the amount you save each month.”

Another simple savings option: Automate a small portion of each paycheck to go directly into a high-yield online savings account opened solely for the purpose of paying for college.

Stay Financially Fit

Remember, it’s important to maintain good financial health. Parents will want to be especially mindful of their credit, because a bad credit score can make virtually everything, including a mortgage, car loan, credit card bill, insurance coverage or even a cell phone plan more expensive – and that means less money going into a college savings fund.

Remember the Big Picture

Parents should remember to save for their happy golden years, too. While a student can borrow money to attend school, individuals can’t get a loan to fund their retirement – and there are ways to pay for college without racking up serious debt. Students can contribute to tuition payments via work-study programs, grants or scholarships. Plus, as noted earlier, state colleges and universities are significantly cheaper than private institutions, so if a 529 plan, Roth IRA or other savings vehicle doesn’t pan out as planned, families will have to consider a more affordable state school or community college instead.

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