Let’s be honest. The cost of college continues to rise every year. So it’s a good idea to start saving for your child’s college education as soon as they’re born. You’ll give your money more time to grow and feel less stressed when it finally comes time to foot the bill. Starting a college fund for a baby is a great way to set your child up for success and help them avoid an overwhelming amount of student loan debt. 

How Much Money Will You Need?

 

Before you start a college fund for a baby, it’s a good idea to sit down and figure out how much money you’ll need to save. Historical data shows that the cost of a college education usually triples over the 17 to 18 year period from birth to college enrollment. 

Therefore, you’ll want to do some research and find out the average cost of an in-state college and out-of-state college the year your baby is born. Then, take these numbers and multiply them by 3. The figures you come up with will give you a rough estimate of how much college may cost when your child is ready to attend.

Chances are the figures you compute will be quite high. If you believe you can meet these figures and save for your child’s entire college education, great! However, if you’re overwhelmed by them, understand that you can pay for half or even a third or a fourth of your child’s college. 

Remember that saving for college does not have to be all or nothing. Any money you can put aside for their higher education will help make a positive difference in your child’s future. Also, don’t forget there are plenty of scholarships and grants out there to make college even more affordable. You can help your child find and apply for them when the time comes. 

 

Start a 529 Plan

 

While there are a variety of ways to save for college, a 529 plan is likely your best bet. At its core, a 529 plan is an investment account that grows tax free. It’s used to fund a number of qualifying educational expenses like tuition, books, and room and board. 

Every state operates its own 529 plan, which often comes with tax breaks. So starting a college fund for a baby can also slash your tax bill. If you research 529 plans in your state, you’ll likely find two options: a 529 savings plan and a 529 prepaid tuition plan.

With a 529 savings plan, you can invest your contributions in a preselected set of mutual funds, just like you may already be doing with your 401(k) retirement plan. A 529 prepaid tuition plan differs in that it can give you the chance to lock in the current cost of college by pre-purchasing college credits at public state universities. 

If you’re interested in opening a 529 account for your baby, UNest is here to help. Our intuitive app makes the entire process easy. Download it to learn more. 

 

Inform Family

 

Once you create a college fund for your baby, realize that anyone can contribute to it. Let grandparents, aunts, uncles, and other relatives and friends know that you’ve opened a 529 plan and are committed to saving for college. 

You can ask them to contribute to it for birthdays and holidays instead of buying toys, clothes, and other items they’ll outgrow. Even a $25 dollar contribution can do wonders for your child’s account. It’ll increase in value as they get older and help you meet your college savings goals. 

While your child may not understand the benefit of their 529 plan and any contributions they receive when they’re young, they’ll be thanking you (and anyone else who has contributed) as they get older.

 

It’s Never Too Early to Start Saving for College

 

There’s no denying that a baby comes with countless new expenses. But if you make college savings a priority early on in their life, you’ll be able to significantly ease their burden of student loan debt in the future. 

Ideally, you’d start saving for college when your child is born. However, if you’re unable to do so or missed the boat on that, no worries. You can start saving for their college education today and pay less taxes while you’re at it. All you have to do is open a 529 plan. 

Ready to get the ball rolling and bring your child’s  529 plan to life? Don’t hesitate to download our easy-to-use app today! Our app makes the entire process seamless and enjoyable! 

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.