The thought of planning for college and figuring out how to cover its gigantic sticker price may seem like a long way off, especially if your kids are just learning their ABCs.
However, there are lots of tangible things you can do even when your child is young to make sure there’s enough money set aside for the day they move into a dorm.
“The biggest thing I recommend to parents is to put away at least half of the money given to a child for their birthday, sweet 16 and Bar or Bat Mitzvah,” Christopher Rim, founder and CEO of college admissions consulting company Command Education, told The Post. “Put those funds into a high-interest savings account and let that money grow. Don’t touch it until you’re going to be paying for college.”
Next, do what you can to set aside money every month, and the best thing you can do is to get started saving as soon as your baby is born.
Birth to age 5: Start strong
While this phase of life couldn’t be busier, with a whole host of added costs for everything from diapers to daycare, it’s just as important to sketch out a college savings strategy that will work within your budget.
Half of Americans don’t know what a state-sponsored 529 plan is, according to Edward Jones Investments. These college savings plans are easy to set up and grow tax-free to be used for education costs.
There’s also no fixed amount of money you’re required to deposit into these funds, provided you don’t go way above what total college costs will ultimately be. Even if you can only spare a small amount every month, that money, which can be used for tuition, fees, room and board, textbooks and even your child’s laptop or other technology needs, will add up over the course of 18 years.
“My advice is to set up an automatic monthly contribution, even if it’s just $25,” said Andrew Lokenauth, a personal finance expert in New York City and founder of TheFinanceNewsletter.com. He added that you can apply for credit cards, such as Upromise Mastercard, that allows you to earn rewards towards your 529.
You can also urge relatives to contribute a sizable gift to the 529 instead of giving expensive gifts to your children. This year the tax-free amount an individual can give as a gift is $18,000 and, in 2025, that number will increase to $19,000.
“In addition, it’s a great idea to consider opening a high-yield savings account as a backup fund and let that money grow year after year,” Lokenauth added.
Elementary school: Meet with a financial planner
We all know the power of compounding your funds and this is especially important when it comes to college costs, said Laura Medigovich, vice president and senior financial planner at Janney Montgomery Scott, a wealth management firm.
“If you wait to start saving until your child is 10, you have eight years until college,” she said. “Eight years of compounding your money is better than two, but it isn’t as good as having 18 years to build up the balance in your child’s college account.”
That’s why Medigovich suggests taking the time now to work with an expert. This person can help crunch the numbers and help you set aside enough money for college, which translates to less stress once your child is about to graduate from high school.
“We like beginning with the end amount you will need,” she said, adding that the average in-state four-year college is $29,910 per year, according to the College Board, while the average private college is $62,990 a year. You have to tack on an additional 5% inflation rate when planning, depending on how many years away college is for your child.
“If you want your child to attend a private college, it might mean you need to aside $800 a month right now,” she said. “If you can only do $100 a month, an advisor can work with you and help you find ways to save as much as possible.”
Middle and high school: Get creative
When your kids have reached this age and stage, it’s likely that they’ll be able to do some odd jobs on the side, whether that’s babysitting or working as a camp counselor in the summer. Once your kids start getting paid, urge them to put half of that money away.
“Earmark that as money for college and put this money into a high interest-bearing account,” Rim said. “Your child might want to use that money for a spring break trip or to help pay certain expenses and having that money in the future will be extremely helpful.”
This is also the ideal time to have honest conversations about money, Medigovich said.
“It’s difficult to explain to your kids that you can’t go on a two-week vacation because you’re saving for their college educations, but it’s so important,” she said.
“The goal is to create a partnership with your child so he or she understands what the goals are for them,” Medigovich said. “It can also instill a love of learning, which is what college is all about.”
Christopher Rim urges families to research merit-based scholarships that are open to students even at this point in their educational careers.
“That’s how many of our students end up paying for college,” said Rim, who also paid for college this way. “Most of the students we work with apply for scholarships as early as ninth grade and that’s a huge component not just to pay for college, but to get into selective universities as colleges want students who have won awards and honors.”
Best of all, these competitions — many are related to a special interest, whether it’s chess, golf or STEM — typically bestow a monetary award to help pay for college.
“An award can come with $20,000 or even $50,000,” he said, adding that the best place to search for scholarships is FastWeb.com, a free scholarship search platform. “And, if you start early, there’s less competition. I’ve seen firsthand — and I’ve been doing this for nine years — that every single year there is a ninth grader who wins a scholarship because no one else applied.”
In addition, to bank in some college savings, urge your high school student to take as many AP classes as possible during the school year for college credit. Or, suggest that they take classes at your local community college during the summer to lower overall semester costs, suggests Bobbi Rebell, a certified financial planner and a personal finance expert at CardRates.com.
This is especially important if you haven’t made enough regular contributions to your child’s college fund and are very concerned about how you will pay the bills once they start coming in.
“You have to start where you are,” said Rebell. “No one is turning back the clock so don’t be ashamed and hide the problem. The best thing you can do is to course correct.”
And, whatever you do, now is not the time to stop funding your retirement accounts in favor of focusing on your child’s college costs.
“There are student loans available, but there aren’t retirement loans, so you don’t want to be in a position of dipping into your retirement to pay for your child’s education,” Medigovich said. “As painful as it may be, your child’s best option might be going to a community college for two years to give you time to set aside more money or you may need to discuss taking on college loans.”
Pairing the reality of how much money you’ve set aside for college should match how you guide your child’s school list of target schools, too, Rebell added.
“Don’t let your child apply to schools where they won’t qualify for financial aid and they don’t have a special talent to secure a merit-based scholarship,” Rebell said. “If your child wants to go to a specific school, sit down and explain that you can’t dip into your retirement and you can’t get a higher paying job, so that’s the reality. Then work together on the options that work best for your family.”
Ultimately, your kids probably already know just how expensive the colleges they’re interested in are.
“Kids know more today than we as parents ever did,” Rebell said. “That’s why I think it’s very important to have a conversation with them as soon as possible explaining what you’ve saved and how this will work.”
By being transparent, you might even keep your kids fiscally motivated, including suggesting that they pay 2% of the overall costs, Rebell said.
“That gives them a stake in the college experience,” she said. “You can also offer to give them some of the tuition back if they work hard and are able to graduate early. This way, they’ll finish college faster and keep the entire family in good financial shape, too.”