A huge part of parenting is allowing your kids to excel in life. Because a degree will open up more doors for jobs and lead to a higher salary, going to college is a significant step on the ladder. 

Yet as we all know, college is not inexpensive. College costs have also been gradually rising for decades, and if you have a small child or are expecting a baby at the moment, they’re likely to have to pay even more for their education. 

You can help them get a college degree without getting stuck with too much student loan debt by saving now for their college education. Many parents are seeking financial advice while deciding to start a college fund for their children. Read on to know about starting a college fund

Learn How to Start a College Fund: When, How Much, What Type?
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When Should We Start Saving?

It is highly recommended for parents to start saving early for their children’s college funds, but a lot of times, it’s a little more complicated than that. The longer you keep compounding your money the better. 

It is crucial that you have already paid off all debts (these include your credit card debt, your own student loan debt, etc.) before you can start saving for your children’s college fund. 

Make sure you’ve already set up a 3 to 6-month emergency fund to cover any unforeseen costs. Additionally, bring 15% of your income to retirement contributions through your employer-sponsored retirement account, such as a 401(k) or Roth IRA. 

It’s a wonderful goal to start a college fund, but it’s not the only aim. You also have other financial concerns, such as paying off your mortgage, credit card bill, or own student debt.

What Are the Types of Accounts?

First, selecting the investment vehicle that meets your needs is critical. There are several types of funds to choose from, all of which have their own rules and tax implications. 

Based on how your finances change over time, you may have more than one account. Below are some college fund savings accounts to choose from.

Education Savings Account (ESA) or Education IRA

An ESA helps you to save $2,000 (after tax) a year, per child. Besides, it grows tax-free! You’d only invest $36,000 if you begin when your child is born and save $2,000 every year for 18 years. 

Although the growth rate can differ depending on the account ‘s investments, you’ll typically receive a far higher return in an ESA than with a standard savings account. You won’t have to pay taxes if you withdraw the money to pay for college expenses.

529 Plan

If you want to save more for higher education for your kids, or if you don’t meet an ESA’s income cap, then a 529 plan could be a better choice. Search for a 529 program that lets you pick the funds you are investing in through the account. 

Avoid using a 529 plan, which would lock your options or change your assets automatically depending on your child’s age. The right 529 plan would also give you the option of transferring the beneficiary to another family member. 

So if your firstborn chooses not to go on the college path, you can still use the funds that you saved in line for your next child.

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

A UTMA/UGMA varies from ESAs and 529 plans in that they are designed not only to save for education. The account is in the child’s name but is handled by a guardian (usually a parent or grandparent). 

This person maintains the account until the child is 21 years old. By age 21 (age 18 for UGMA), control of the account is then passed to the child to use however they want.

How Much Do We Need to Save?

Learn How to Start a College Fund: When, How Much, What Type?
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Currently, the total cost of in-state tuition and fees is around $10,000 a year, in addition to lodging, books, and other expenses. You can only imagine how costly it would be when your children enter the undergraduate level. 

Your savings can be moderate, and many parents find that they can spare $25 – $100 from each salary, which is automatically deposited into their chosen college savings account. When you earn a raise or bonus, the money (or a portion) can also be earmarked for college savings.


Whether your child is a teenager or a toddler, now is the perfect time to begin a college fund. One financial advice for parents is to start by considering all of your options in making the best decision for the future of your children.