8 Ways to Save for Your Child’s College Education

It’s never too early to start saving for college, especially for your child. College costs keep rising, so planning far in advance can make a big difference. The money you save up could cover many future education costs—even small, regular contributions can add up!

Prioritizing saving for college can help make it easier to set aside money consistently. The key is developing a plan that does so without breaking the bank.

Here are 8 smart ways to help you save money for your child’s college expenses. 

1. Start saving for college as early as possible

The average annual tuition and fees at public 4-year colleges is $11,610 for in-state students and nearly $30,780 for out-of-state students, according to 2024 College Board data. At private 4-year institutions, that figure jumps to approximately $43,350 per year. When you multiply these annual expenses by 4 years and add room and board, books and other expenses, the total cost of a college education jumps even higher. That’s why it’s so important to start saving as much money as you can when your child is young.

Every dollar you save now helps reduce the amount of money you’ll need to borrow later. And when you start saving early, compound interest can become your strongest tool. If you begin saving money while your child is very young, your money will have more time to grow. Even modest monthly savings amounts can build into large sums over 15 to 18 years. Using a college savings calculator can help you test out different scenarios and potential results.

The effect of compound interest on college savings (representative example)

Starting saving early can also give you room to adjust how much you’re putting aside. You could even start by setting aside smaller amounts of money—perhaps $25 or $50 a month—when your child is very young. Then, you can increase your monthly contributions as your income increases so you can catch up on college savings.

As the years go on, money may be tight during some months or years, so your early savings can keep growing even when you can’t add as much money to it. This can help keep you on track to meet your college savings goals.

2. Open a 529 college savings plan

A 529 plan is a tax-advantaged account made specifically for college costs. Your money grows tax-free, and you won’t have to pay taxes when you use it for qualified higher education expenses like tuition, books, and room and board. Many states also offer tax breaks when you contribute to their state-sponsored 529 plans.

One of the top benefits of 529 plans is the tax advantages they offer, such as tax-free growth on qualified withdrawals and potential state tax reductions. Most 529 plans let you contribute large amounts—often more than $300,000 total per account—and allow you to keep control of the funds. If one child doesn’t use all the money, you can transfer it to another family member.

3. Invite family members to contribute to college savings

Grandparents, aunts, uncles and other family members are often willing to help with college costs. Encourage them to contribute over the years to your child’s education fund for their birthdays and on holidays. Many 529 plans offer online gifting platforms where relatives can add money directly to your child’s college savings account. 

Don’t hesitate to talk about your college savings needs with your family. Many will appreciate giving a gift that lasts longer than toys or clothes. For grandparents, helping with education can be both rewarding and financially savvy. They may get tax benefits while making a lasting impact on their grandchild’s future. Consult with a tax advisor for additional details.

4. Consider a Coverdell Education Savings Account

Coverdell Education Savings Accounts (ESAs) offer another tax-advantaged option for college savings. They have lower annual contribution limits than 529 plans—$2,000 per year per beneficiary—but they may give you more freedom in how you can save.

The main benefits of Coverdell ESAs are tax-free growth and withdrawals when the money is used for education costs. Unlike 529 plans, you can use Coverdell funds for qualified school costs from elementary school through college.

These accounts can work well alongside 529 plans, especially if you want to save for both college and K-12 private school. However, income limits may affect who can use Coverdell ESAs, and you have to stop contributing when your child turns 18.

Traditional savings vehicles like U.S. savings bonds and money market accounts can be college savings options, too. Series EE and I savings bonds offer guaranteed returns with minimal risk and may provide tax benefits when used for qualified education expenses. Money market accounts typically offer higher interest rates than regular savings accounts. These two options don’t provide the same tax advantages as 529 plans or Coverdell ESAs, but they may offer greater stability and liquidity.

5. Look into other savings vehicles

If you have several children on different college timelines, having a variety of savings options can help you manage your funds based on when each child will need them. For instance, you could leave long-term savings in growth accounts while keeping near-term expenses in less volatile, easy-to-access accounts.

Other potentially effective savings options include Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts. These allow parents and guardians to invest money in their child’s name, which can be used to pay for college later.

6. Set up automatic contributions

Success in college savings depends on setting a realistic savings goal and being consistent. Even modest amounts may grow significantly over time. And setting up automatic monthly transfers from your checking to your savings account is one of the best ways to stay on track with your college fund planning.

Automatic contributions make saving easier by treating your college funds like any other monthly bill. When it’s part of your budget, you can ensure that money will go toward those future needs. Review your savings and increase your automatic contributions whenever you get a raise, bonus or tax refund.

When saving becomes routine, you’ll be less likely to miss that money. More importantly, setting up automatic contributions means you can save consistently so you can be better prepared when the tuition bill arrives.

7. Think about different investment strategies

Your investment approach should change as your child ages. More aggressive growth investments often work well when your child is young while steady investment options can become more effective as they get closer to college.

Many college savings accounts offer age-based portfolios that adjust automatically. These “set it and forget it” investment options become more conservative as your child approaches college to protect your savings.

If you prefer to manage investments yourself, consider this mix based on your risk tolerance:

• growth funds for long-term savings (more than 10 years before college)
• balanced funds for mid-term savings (5 to 10 years before college)
• conservative investments as enrollment nears (less than 5 years before college)

8. Reassess your college savings plan regularly

Life changes, and your college savings plan should adapt. Review your strategy every year to make sure you stay on track to meet your goals. 

During your annual check, you might consider:

• increasing contributions if your income has grown so you can save more money.
• adjusting investment strategies based on market performance and time until college.
• updating your savings goals based on changing education plans or estimated costs.

College costs can rise from 3% to 5% each year, which is typically faster than regular inflation. Your savings plan should account for these increases. If you fall behind your goals, you could make small changes like cutting back on extra spending to save more monthly or exploring other savings options. 

As your child’s freshman year approaches, look into scholarships and grants that could further offset college costs and lower potential student loan amounts. And, if you do secure a student loan, it could potentially help fill any gaps in funding.

Navy Federal can help you save money for college

Starting your college savings today is the most important step toward making education costs manageable. Every dollar saved now means potentially less student loan debt for your children later. The best college savings plan is one you maintain over time.

Learn more about ways to save for college with our MakingCents educational resources. Check out Navy Federal’s education savings options that can help your child pursue higher education with confidence.