Start Saving Early: The Ultimate Key to College Funding

Start Saving Early: The Ultimate Key to College Funding

June 28, 2023

As a parent holding your precious newborn, you dream of their success in life, including the many opportunities that come with a college degree. However, we all know how expensive it is to care for a child from birth through high school graduation. According to the Brookings Institution, the average cost is at least $300,000. This explains why many parents, and even grandparents, struggle with fulfilling the dream of providing their child with a debt-free higher education due to the daily expenses such as diapers, formula, school lunches, transportation, and other necessities.

Don't wait until it's too late - start planning early for your child's education expenses. A recent survey by found that 20% of families say they want to save for college but have yet to take action. To avoid falling into this statistic, we have compiled some helpful tips for parents and family members looking to get started on funding higher education.

  1. 529 plans*. Discover your state's tax-advantaged plans for funding education! Your investments grow tax-free until you need them for tuition expenses - not just college, but private-school education, too. You may change the beneficiary and re-allocate funds if a student decides not to attend college, passing the savings on to younger siblings or even parents who want to further their education. Check out different state plans for different investment options.
  2. Roth IRAs. Did you know you can use your Roth IRA funds for qualified educational expenses? While it's primarily a retirement account, Roth IRAs offer some flexibility when it comes to paying for education. Just keep in mind that contributions are limited to earned income, which may make it necessary for parents or grandparents to contribute on behalf of their child. Plus, as long as the Roth account is at least five years old, you won't be penalized for withdrawals before age 59 ½ when using the funds for education.
  3. Regular Saving over time. You don't need a special account to help with a child's college expenses. Starting early and maintaining a consistent deposit schedule can significantly ease the financial burden. Allowing the funds to compound over a longer period is key. Many parents also contribute "bonus" income to the education fund, such as tax refunds, salary increases, and birthday gifts. Additionally, continuing to deposit money saved from reduced childcare costs into the account after a child enters public school will also help. Developing a habit of saving with occasional windfalls will pay off in the long run when it's time to cover tuition expenses.

At Moscaret Investment Advisory, we specialize in helping parents and grandparents plan for education funding. To learn more, read our recent article, "The 529 Plan: A Guide for Parents and Grandparents."


*The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.