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home › Life Events & Financial Decisions › Education and Careers › College Planning › Saving for College

Saving for College

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With college costs rising faster than the inflation rate, building a nest egg for your child’s education is vital. Use the information below to generate a strategy.

Make a plan

It is impossible to know what kind of school your child will attend, so accommodate for different scenarios.

Decide the percent of college you can cover and what you’d like your child to cover. Few parents pay the entire cost because scholarships, loans, and financial aid can ease the overall burden.
Plan for future college costs by researching the current prices of potential schools here. Make sure to look at community colleges, technical schools, and private universities to cover your bases.
Project the inflation-adjusted college cost for your child with this calculator. As a general rule, current numbers will increase 4 to 6 percent per year.
To determine your annual savings requirements, use online calculators from sites such as Bankrate. Plug in today’s price, along with the current age of your child, and you’ll have a handy yearly savings schedule.

College Savings Plans

Your child’s age will have an impact on how you save. You might use the following methods for each of your child's life stages:

Elementary School: Riskier, long-term investments that yield higher returns such as stocks and mutual funds
Middle School: Less risky, but lower return investments, such as short- and intermediate-term bonds and interest-earning money market mutual funds
Graduation from High School: Low-risk investments

There are several investment and savings accounts meant specifically for families saving for higher education.

529 College Savings Account: These accounts let the government do all the work. The state makes investments and automatically decreases the risk as your child gets closer to college. View your state's specific plan.

529 Prepaid Tuition Account: If you know you want your child to go to a certain state or municipal university, this plan allows you to purchase tuition credits at that school at today’s prices. That means you will pay inflation-free college tuition for your child.

Coverdell Account: A Coverdell Savings Account (also called an Education Savings Account or ESA) takes care of the investing for you, putting savings up to $2,000 a year in stocks, bonds, and mutual funds.

Trusts, money market accounts, Roth IRAs and U.S. Savings Bonds also can be useful for saving. For more information on these alternative methods, download this booklet.


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Related resources

	Saving for College
	Saving for Your Family's Future
	Planning for the Costs of Higher Education

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