Saving for College: It’s Never Too Early to Start

College is one of the most significant investments you can make in your child’s future. With the cost of higher education continuing to rise, starting early is critical to making college more affordable.  As a parent with two children attending college in 2025, I can not be more thankful that I set money aside early, but did I set aside enough?

It is never too early to start saving for college!

Whether you’re a parent planning for your child or a grandparent looking to contribute, there are powerful savings tools that can help set your loved ones up for success.

Let’s explore the current cost of a college education, why early planning makes a difference, and how options like 529 plans, Roth IRAs, and Coverdell accounts can help you save.

The Rising Cost of College

College costs have been steadily climbing, and for many families, the price of an undergraduate degree is daunting. Here’s a snapshot of average costs for the 2025-2026 academic year:

• Public In-State University: ~$29,910/year (tuition, fees, room, and board)
• Public Out-of-State University: ~$49,080/year
• Private University: ~$62,990/year.

Over four years, that translates to:

• Public In-State: $109,640.
• Public Out-of-State: $196,320.
• Private University: $251,960.

These figures don’t even account for inflation or additional costs like books, transportation, and personal expenses, making it crucial to start saving early.

These numbers are per kid!

Saving Options: 529 Plans, Roth IRAs, and Coverdell ESAs

When it comes to saving for college, there’s no one-size-fits-all solution. Each option has its benefits, and choosing the right one depends on your goals, timeline, and financial situation.

1. 529 College Savings Plans

A 529 plan is one of the most popular tools for saving for education.

Key Features:

• Tax Advantages: Contributions grow tax-free, and withdrawals for qualified education expenses (tuition, fees, books, etc.) are tax-free.
• High Contribution Limits: Many plans allow contributions of over $300,000 per beneficiary.
• Flexible Use: Funds can now be used for K-12 tuition (up to $10,000/year) and up to $35,000 can be rolled into a Roth IRA for the beneficiary under new 2024 rules (with restrictions). Note that some states, like California, do not allow these uses without penalties.
• State Tax Deductions: Some states offer tax deductions or credits for contributions.

Best For:
Families looking to save specifically for education, with tax-free growth as a major incentive.

2. Roth IRAs for Kids

A Roth IRA isn’t just for retirement—it can also be a great tool for college savings.

Key Features:

• Tax-Free Withdrawals: Contributions can be withdrawn tax-free at any time, and earnings can be used for qualified education expenses without penalty.
• Flexibility: If the child doesn’t need the funds for college, the money can remain in the Roth IRA and grow for retirement.
• Contribution Requirements: The child must have earned income to qualify, but parents or grandparents can contribute up to the amount of their earnings (max $7,000 in 2025).

Best For:
Families who want a flexible investment options that can support either education or long-term savings goals.

3. Coverdell Education Savings Accounts (ESAs)

While less common than 529 plans, Coverdell ESAs offer tax advantages for education savings.

Key Features:

• Tax-Free Growth: Like a 529, earnings grow tax-free, and withdrawals for qualified expenses are tax-free.
• Lower Contribution Limits: Limited to $2,000 per beneficiary per year.
• Broader Uses: Funds can be used for K-12 expenses, making them more versatile for early education costs. Again, consider state restrictions.

Best For:
Families with lower adjusted gross income limits looking for an option to cover both college and K-12 expenses, with more flexibility in investment choices.

Why Starting Early Matters

The earlier you start saving, the more time your money has to grow. Thanks to compound interest, even small contributions made early can lead to significant savings over time.

Example: Starting Early vs. Delayed Savings

• Scenario 1: You save $200/month starting when your child is born.
  • Over 18 years (at 7% annual growth): ~$87,000.
• Scenario 2: You start saving $300/month when your child is 10.
  • Over 8 years (at 7% annual growth): ~$38,000.

By starting earlier, you more than double the savings with less monthly strain.

How Parents and Grandparents Can Contribute

One of the best things about these savings tools is that contributions aren’t limited to parents. Grandparents, aunts, uncles, and other family members can contribute to a child’s education fund, making it a group effort.

529 Plan Gift Contributions

• Contributions to a 529 plan qualify for the annual gift tax exclusion ($19,000 per person in 2025).
• Married couples can contribute up to $38,000 per child per year without triggering gift tax reporting.

Superfunding a 529 Plan

For those looking to make a larger impact, you can "superfund" a 529 plan by contributing up to five years’ worth of gift exclusions at once:

• Individual: $95,000 (5 × $19,000).
• Married Couple: $190,000 (5 × $38,000).

This strategy allows for significant upfront funding, giving the investments more time to grow.

Tips for Maximizing College Savings

1. Set a Goal: Start with an estimate of the college costs you want to cover—50%, 75%, or 100%—and work backward to calculate your monthly savings target.
2. Automate Contributions: Set up automatic monthly deposits to your savings account or 529 plan to stay consistent.
3. Involve the Family: Encourage grandparents and relatives to contribute to a 529 plan as birthday or holiday gifts.
4. Review Annually: Reassess your savings plan each year to adjust for changes in income, expenses, or education goals.

Investing in Your Child’s Future

Saving for college doesn’t just reduce financial stress—it gives your child more opportunities to choose the education that’s best for them. By starting early and using tools like 529 plans, Roth IRAs, and Coverdell ESAs, you can give them a head start on their future.

Ready to Start Saving?

If you’re unsure which college savings option is best for your family, I’m here to help. Let’s create a personalized savings plan that aligns with your financial goals and maximizes your tax benefits.

Contact Us to schedule a consultation, and let’s start building a bright future for your child or grandchild.