The Best Way to Save for College: Tips for Parents & Students

The Best Way to Save for College: Tips for Parents & Students

You can probably guess that I get a lot of questions from prospective college students and their parents. Along with how to get into college, “What’s the best way to save for college?” tops the list. 

The truth is, there are several different—and effective—ways to save for college. Today, I’m going to share some of the common methods for saving for college, as well as some of my top budgeting tips for college students. 

How to Save for Your Child’s College Education

Before I get to how a college student can budget once they’re already in college, let’s talk about three good options for how parents can save money to get their child to college in the first place. 

Choosing the best way to save for college depends on so many factors that no one answer is right for every family. These are three of the most popular ways parents save for their child’s education. We’re going to explain a bit about each one to help you determine what might make sense for you.

  1. Education Savings Account (ESA) or Education IRA
  2. 529 Plan
  3. UTMA or UGMA (Uniform Transfer/Gift to Minors Act)

Education Savings Account (ESA) 

With an Education Savings Account (ESA), you can save $2,000 (after tax) per year, per child. The best part is, it grows tax-free. However, the amount it grows will depend on the investments in the account. Luckily, you’ll usually earn a much higher rate of return with an ESA than you do with a regular savings account. You also won’t need to pay taxes when you withdraw the ESA money for education expenses.

Just keep in mind, the money in an ESA must be used by the beneficiary by the time they’re 30, and you must also be within a certain income limit to qualify. Learn more about these plans here.

529 Plan

With a 529 plan, you can save for your children’s college education with higher limits than you get with an ESA. Limits vary from state to state, but most account-holders can contribute up to $300,000. Conveniently, these accounts aren’t designated to a specific child either. Perhaps your firstborn decides to take a different route than post-secondary education. This money can be used for your younger child’s education instead, although this could come with some restrictions in certain cases. 

UTMA or UGMA (Uniform Transfer/Gift to Minors Act)

Unlike a 529 plan or an ESA, the money in a UTMA or UGMA does not necessarily need to be used for education. When the beneficiary reaches age 21 (or age 18 for the UGMA), they get control of this account to use as they wish. There are some tax benefits to these accounts as well: since the assets are technically the property of the minor, a portion of the investment income goes untaxed. Then, an equal amount is taxed at the child’s tax rate, rather than the parents’ or other custodians’ rate.

Budgeting for College Students

Whether your parents have saved for your college or you’re relying on student loans and your own income, budgeting for college students can be a challenging—yet critical—task. 

Though it’s often overlooked, one of my favorite ways for college students to save money is choosing a college with free laundry. I explore this topic even more in this blog post. 

Here are some of the other ways college students can save money:

  • Create a budget that clearly outlines your expenses vs. your income. This should always be the first step. It’s a quick way to see obvious areas that could be a problem (like a $7 coffee per day habit!).
  • Always research scholarships you could be eligible for. Here are some case studies of how the students I work with have scored big scholarships.
  • Compare the cost of living on campus vs. off. Price isn’t the only consideration here either. Here are some of the pros and cons of living off-campus.
  • Buy used textbooks whenever possible. This can be an incredible money-saving method for college students, especially considering textbook costs are estimated to have jumped 812% in the last 35 years. 
  • Seek out campus resources for cheap—or free—fun activities at school.
  • Utilize free campus amenities whenever possible.
  • Limit meals out, especially if you’re already paying for a meal plan and living on campus. 

Easing the financial burden of a college education is possible, although it can come with its challenges. Whether you’re saving money for a future college education or trying to cut back on costs as a student, it takes planning and forethought to pull it off. 

But help is available!

If you’re looking for one-on-one guidance to help you your teen get in and get money for college, click here to learn more. 

Are you struggling to find the right college? Sign up for my FREE upcoming master class!

Want to see more posts like this? Don’t miss these: 

What to expect at freshman orientation

Top 10 must-dos for college-bounds juniors

7 ways to support your teen during the college application process

How to Make the Most of Middle School

How to Make the Most of Middle School

What happens if your child doesn’t make the most of middle school?

Every fall, I hear from parents of high school seniors with last-minute questions about getting into and getting money for college. If it’s still early enough in the season, they will often sign up for my firm’s Comprehensive Assessment. 

That’s where we do a deep dive into their teen’s prospects based on academics and activities. We also determine the best-fit colleges for their needs and interests and discuss options to get more scholarship dollars. 

There are usually several moments during this 90-minute assessment when I feel the painful cringe of the parent. I know they think, “I wish I had known . . . “ 

It’s a feeling every parent has had at one point or another when you regret something you did or didn’t do for your child. What’s so harshly regretful about college admissions? That the decisions we may or may not make as parents can not only hurt our teen’s chances of admissions and future but can cost our pocketbooks dearly.

Even when parents of college-bound seniors have very limited options or opportunities to undo bad grades, I still encourage them to consider alternatives like college list revisions or a formal gap/bridge year experience. Senior year of high school can still be a new beginning regardless of how ugly the transcript or resume may be.

The one thing that can’t be changed is the middle school years, which are so critical for high school and college success.

Are you struggling to find the right college? Sign up for my FREE upcoming master class!

Here are 3 tips that every middle school parent should heed to avoid future regret in senior year of high school:

Make sure your teen reads and writes for pleasure.

The best habits always start earlier.

By the time your teen is a junior or senior in high school, it will be even more difficult to develop a love for reading and writing if that habit has not been nurtured from earlier years. Parents often tell me that their teens enjoyed reading when they were younger but stopped in middle school or high school when the homework increased. That may sound plausible, but it’s really not an excuse. Everybody is “busy.” But when you enjoy something, you make time for it.

I feel that students lose their intellectual curiosity and that’s why they no longer read or write for pleasure.

Long story short . . . colleges are seeking students who are intellectually curious, and that quality is only nurtured over time. It is likely that your teen will have a college application essay or two that asks specifically about what they read for pleasure. The inability to respond thoughtfully and authentically to such a prompt will dramatically decrease their chances of being accepted. 

Here are 5 tips for teaching your teen to love reading.

Pay attention to math placement.

I have met more and more high school seniors who want to major in STEM fields but did not take algebra until high school. To have the best chances for a competitive application for any STEM (Science Technology Engineering and Mathematics) major, a teen should take algebra by 8th grade. This will also position them for any additional testing, like SAT subject tests, that may be “recommended”, i.e. required for college applications.

Want to learn more about college entrance tests? Here are 3 reasons why taking the SAT and ACT could be a waste of time and money. 

Use the summers to develop social and independent skills.

There are a number of “sleep-away” camps offered during the summer break of middle school. Some may have an academic component while others may emphasize sports or social skills. 

Either way, when teens learn how to “be” when they are away from the comforts of home and familiarity, they gain self-confidence, independence and so much more. Introducing these types of programs in middle school match well with them developmentally and there are even programs with shorter stays. If 7 days is too long, 3 or 4 day overnight programs for a middle school student are plentiful.

By the time a teen is in senior year, if they have never spent a night away from home then the thought of going away to college may be too daunting. The teen may be ill-equipped to handle the freedoms that come with living in a dorm; doing chores like laundry and cooking, or even advocating for themselves in college. 

Implementing these tips in middle school will help ensure your child has a smoother path to college and a more successful experience once they’re there. 

What would you add to this list? Please comment below.

If you want more tips and insight on helping your college-bound teen, purchase your copy of “What to Know Before They Go: College Edition” today!

If you’re looking for one-on-one guidance to help you get into (or pay for) college, click here for help. 

Want to see more posts like this? Don’t miss these: 

What to expect at freshman orientation

Top 10 must-dos for college-bounds juniors

7 ways to support your child during the college application process

 

This article was originally published November 19, 2017, but has since been updated.