When it comes time for your child to attend college, you want to ensure there are sufficient funds saved for them to do so. While saving for college takes a great deal of dedication and hard work, it’s always worth it.

College savings can help your child avoid overwhelming amounts of student loan debt and allow them to enter adulthood on the right foot. Fortunately, there are a variety of ways you can save money for your child’s higher education. Let’s dive deeper into how to save up for college tuition.

1. Scholarships and Grants

Applying for scholarships and grants is a tedious, time-consuming process. But it can save your child a great deal of money on their college education. While scholarships can come from a variety of sources including businesses, individuals, and religious groups, grants are typically offered by state or federal financial aid that is given to a specific college or university. Encourage your child to apply for as many scholarships and grants as they can.

 

2. Community College

There’s no denying that a community college is far more affordable than a four-year college or university. So if your child begins their college career at a community college,  they can save thousands upon thousands of dollars.

Although this may not be the most exciting option, it’s ideal if your child is a self learner or is unsure of what type of career they’d like to pursue. They can graduate with an associate’s degree and look for a job or transfer to a college or university eventually.

 

3. Financial Aid

Financial aid refers to any type of funding that can be used to pay for college. It may include scholarships, grants, loans, and work-study programs. To be eligible for most of it, your child will have to complete the Free Application for Federal Student Aid or FAFSA.

If the federal government determines your child is a candidate for need-based aid, they may receive grants or work-study dollars. In the event your child is ineligible for need-based aid, they may secure merit-based aid or scholarships for their academic, athletic, or artistic achievements.

 

4. Coverdell ESA

The Coverdell Education Savings Account (ESA) can help you save for your child’s college when they’re under 18. If you use the funds on qualified expenses like tuition and books, you won’t have to pay federal taxes on them.

While the Coverdell ESA may seem like a great option, there is one caveat to be aware of: You can only contribute up to $2,000 per year per child. Since college costs are rising each year, it may keep you from saving enough money.

 

5. Prepaid Tuition Plans

With a prepaid tuition plan, you can lock in tuition at current rates to cover college costs when your child is ready to attend college. You can contribute a lump sum or make regular installments.

When your child enrolls in college, the plan will pay the school directly with the money you’ve saved. It’s important to note that prepaid tuition plans aren’t available in every state and are only recommended if you believe your child will go to a state college or university.

 

6. Retirement Accounts

Although a Roth IRA is usually used to save for retirement, it can also act as a college savings tool. You can invest after-tax money and withdraw up to the amount you’ve contributed at any time for any reason without facing any taxes or penalties. A Roth IRA can give you the flexibility of allocating your funds toward college or retirement.

But the main drawback is that there are limits to how much you can contribute. These limits are $6,000 per year if you’re under 50 and $7,000 if you’re older than 50. Additionally, you may not be able to save in a Roth IRA if your income exceeds $139,000 as a single filer or $206,000 as a married filer.

 

7. UGMA and UTMA

The UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) are custodial accounts designed to hold and protect money for minors until they reach the legal age in their state. While they allow stock, bond, and mutual fund investments, they do not permit higher-risk investments like stocks.

You can invest as much money as you’d like with these accounts because there are no limits. In addition, the funds may be allocated toward anything, not just college expenses. Keep in mind that if you go this route, however, your earnings will be taxed once they exceed $2,100.

 

8. Brokerage Accounts

If you opt for a brokerage account, you’ll get to invest in anything you’d like: stocks, mutual funds, bonds, currency, or futures. This is a flexible option as you’ll be able to deposit and withdraw money at any time without penalty.

The most noteworthy downfall to brokerage accounts, however is that they don’t come with any tax advantages. You’ll be on the hook for paying taxes on any returns you earn. You may also have to make a minimum investment and pay management fees.

 

9. Savings Bonds

Since they’re secured by the federal government, savings bonds offer a risk-free way to save for college. You won’t miss out on any principal and your child won’t be able to access the funds until they’re older and ready for college.

While savings bonds may seem like a great choice, their returns are far less desirable than those of other colleges savings options. So if you want your money to really work for you, it’s probably a good idea to take a risk and opt for an alternative solution.

 

10. 529 Plans

A 529 college savings plan is the ideal way to save for college. Not only does it allow for tax-free growth and withdrawals for education-related expenses, it may qualify you for a partial or full tax deduction.

It’s a lot like a Roth IRA but better because there are no contribution limits and you can open one regardless of your income. If you open a 529 plan, you can choose from an age-based investment option or create your own portfolio.

 

Ready to Save with a 529 Plan? Use the UNest App

If you’d like to start saving money for college tuition through a 529 plan for your child (or anyone else you love), check out the UNest mobile app. It’s specifically designed to make the entire process easy and enjoyable. You’ll be able to open an account and manage it from your smartphone or tablet. Download the UNest mobile app today!

Blogs and articles contain the current, good faith opinions of the authors but not necessarily those of UNest. The documents are meant for educational purposes only and should not be considered as investment advice or a recommendation of any type.  The documents may contain forward-looking statements.

 

 

Ksenia Yudina, CFA, MBA

Founder and CEO

Ksenia is the Founder and CEO of U-Nest, the first mobile app that makes it easy for families to save for college. As an entrepreneur and finance professional, Ksenia has focused on alleviating the impact of student debt on families across the economic spectrum. Previously, Ksenia was a Vice President atCapital Group/American Funds, the largest 529 provider in the U.S. In this role, she played a leadership role in helping parents plan and manage their finances, with a focus on the future well-being of their children. Prior to Capital Group/American Funds, she was founder of a residential real estate company. Ksenia earned her bachelor’s degree in finance from CaliforniaState University Northridge, and an MBA from UCLA’s Anderson School of Management.

Mike Van Kempen

Chief Operating Officer

Mike joined U-Nest in September 2019 as COO. He was previously at Acorns, a financial wellness platform, where he spearheaded the analytics and growth initiatives. Mike successfully expandedAcorns’ paid acquisition strategy, adding over 4.5 million investment accounts. Mike began his career in strategy & analytics at Belly, a Chicago-based loyalty startup in 2012. At Belly, Mike led projects that fueled growth across all aspects of the business, growing the customer base from1,000 to over 11,000 merchants, and accumulating a membership of over 2 million customers.Mike holds a B.B.A. in Finance from Loyola University of Chicago.

Steve Buchanan

Chief Technology Officer

Steve has over 20 years of experience in delivering digital innovations in the financial sector. Steve previously orchestrated product architecture and innovation as a Solutions Architect/ Fintech consultant at Union Bank. Prior to Union Bank, he was Chief Architect and Director of Engineering at Calypso, a Silicon Valley startup, where he architected and built multiple financial solutions. He was also Head of Global Integrations at Globe One in Vietnam where he integrated its Peer-to-Peer lending products into core banking solutions. Steve also built the first ever electronic Equities &Equity Options trading systems for Scottish stock brokers Wood Mackenzie (acquired by CountyNatWest). He is a graduate of Edinburgh University.

Peter Mansfield

Chief Marketing Officer

Peter has built an impressive track record in multiple financial industry segments including payments, credit/prepaid cards and lending. He has played an instrumental role at a succession of financial industry leaders, co-founding companies such as Brand3 (acquired by American Express) and PropertyBridge (acquired by Moneygram), and, as the early stage marketing lead at Marqeta (where he was team member number two), BillFloat and WallabyFinancial (acquired by Bankrate).He has helped fast-growth companies reach an aggregate market value of close to $8 billion. Peter holds a bachelor’s degree in economics from the University of Angila, UK.

Sonya Kidman

Client Relationship Manager

Sonya Kidman is a Customer Success professional with a decade of experience in advocating for consumer through user research and genuine empathy. Sonya specializes in user behavior and regularly attends national and global training sessions in wellness and people analytics tools. Sonya is a true global citizen was born in Russia, grew up in Israel, lived and worked in Canada and NewZealand. That global expertise along with an undergraduate degree in Sociology from Tel AvivUniversity have helped to shape a bullet-prof Sonya's framework to develop a winning customer strategy.

Frank Mastrangelo

Board Member

One part banker and one part technologist, Frank spent his early days with the Annenberg Foundation and PNC Bank. His career path led him to Jefferson Bank, where he led the build-out of its electronic banking platforms, and where he would forge a powerful alliance with The Bancorp co-founder Betsy Z. Cohen. As President and COO of The Bancorp from its inception in 1999 Frank played a critical role in helping the organization become an industry bellwether for branchless financial services and a global leader in payments. For this, he has become a widely respected fintech expert, and thought-leader. Frank was recognized in 2013 by Banking Innovation, a leading industry journal, as an “Innovator to Watch.” and as one of the innovators shaping the future of banking. Frank is a graduate of West Chester University of Pennsylvania.

Disclosure

College Savings Calculator is a hypothetical tool that demonstrates how monthly contributions, age-based asset rebalancing, and tax savings may impact the long-term value of your account, and do not take into account a portfolio’s underlying investment management fees. Calculations assume the private institution cost inflation is 2.8%, public out of state cost inflation is 3.9%, public in state cost inflation is 2.7%. Portfolio is assumed to have only stocks and bonds. Monthly equity returns are based on the historical data from the 10-year track record of the stock market (SPY). Monthly fixed income returns are based on the historical data from the 10-year track record of the bond market index (AGG). The current college expenses are provided by the collegeboard.org. Actual account performance may differ due to market fluctuations, changes in recurring investments, and asset allocation. The information provided here is for illustrative purposes only and does not represent actual or future performance of any investment option and is not intended to predict or project the investment performance of any security or index.