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Saving For College

Strategies and saving accounts to get ready

COLLEGE SAVINGS BASICS

Imagine sticker prices that increase at twice the rate of annual inflation. That’s how much college costs (tuition, fees and room and board) are outpacing the economy. How can the average American family keep up? Start saving asap. It’s never too early to start, but it’s never too late either. The more money you can put away for college, the less you’ll need to depend on a HELOC or personal loan. What are the best savings accounts and tax-advantaged investment vehicles to help you accomplish your goals?

College Savings FAQs

Like 529 plans, a Coverdell Education Savings Account (CESA) offers tax-deferred savings and tax-free withdrawals for qualifying education expenses. Unlike 529s, benefits apply not only to higher education but elementary and high school education expenses as well. While CESAs are not deductible and impose annual contribution limits, their flexibility and tax benefits make them a valuable part of a college savings strategy. Open one in the name of any child up to age 18.*

*Contributions are not tax-deductible and are limited to $2,000 annually. Available only to single taxpayers with adjusted gross income (AGI) levels of $95,000 or below and married taxpayers with AGI of $190,000 or below.

At this point, you can start getting them involved in the process. Stress the pillars of their middle and high school years that will have the greatest impact on financial aid awards: grades, community service and extracurricular activities. Set up a college saving account if you haven’t already and fund it aggressively, prioritizing college over retirement funds if necessary.

Open an education saving account before they're born if you can, or within the first month if not. Make the most of the years ahead and save a little at a time. You’ll be amazed at how even small amounts like $50/month will pay off over time. As for existing financial commitments like 401k or IRA contributions, you may want to scale back and invest the difference in a college savings plan. Think of it as tending your nest and still building your nest egg.

Birth through elementary school is the time to experiment with as many savings options as you can. Diversify your savings in an assortment of saving accounts, investments, savings bonds and Coverdell ESA programs. Set up a budget and stick to it.

Let’s fuel your college savings.

Coverdell ESAs, high-yield saving accounts and more.

COVERDELL EDUCATION SAVINGS ACCOUNT

Take advantage of the flexibility and tax advantages of this alternative to 529 plans.

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CDs

Set it and forget it – pick a term, lock in the rate and watch your money grow.

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SAVINGS GOAL CALCULATOR

What’s the best savings account interest rate to reach your goals? Find out with our savings account interest calculator.

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