Sending your child to college can be costly, but you can achieve your savings goals with a solid plan. Here’s how to set up your college savings strategy without accumulating debt.

More than $145,000: That’s the estimated expense for sending your freshman to a moderately priced, in-state public school, based on data from The College Board. This figure includes housing and meals but overlooks other costs like textbooks, travel, and social outings. If your child opts for out-of-state tuition or a private institution, expenses can be significantly higher.

Keep in mind that many students take longer than four years to graduate, which can add to your financial burden. Bottom line: You’ll need substantial funds for your child’s education. Here’s how to prepare.

1. Begin Saving Immediately

Even if you can set aside just $25 to $50 each month, start investing in a 529 college savings plan. Setting up automatic transfers will help make saving a regular habit, and your contributions will grow over time tax-free when used for qualified educational expenses.

What is a 529?
A 529 is a tax-friendly savings option designed to help families save for future education costs, as outlined by the SEC.

We started a 529 for our daughter at birth, and we expect to have about $10,000 saved by her high school graduation. It’s a great start for covering her educational expenses, but we know we have a long way to go to reach that $145,000 goal.

Financial expert Jean Chatzky advises not to stress about saving the entire amount. “While it’s great to aim for full savings, prioritizing your retirement is crucial because there’s no aid for that.” She recommends aiming to cover about a third of the total cost, planning to fund another third through current income during college, and seeking financial aid for the last portion.

Want to set a college savings goal for your family? Check out this simple college cost calculator.

2. Choose the Right 529 Plan

529 plans are a popular choice for college savings due to their tax-deferred growth and tax-free withdrawals for educational expenses. Each state offers its own plan, and you can choose any state’s plan, but some offer better investment performance and benefits. For instance, we live in Florida but invest in Virginia's 529 plan. About 30 states provide state tax deductions for contributions to their plans. Websites like savingforcollege.com and morningstar.com can help you compare 529 plans across different states to find the best fit for your needs.

What qualifies as an educational expense for 529 withdrawals?
Qualified expenses include tuition, room and board, technology, books, and supplies for post-secondary education.

3. Explore Age-Based Investment Choices

Make sure your 529 funds are working for you.

Like 401(k) plans, 529 plans offer various investment options. Many plans feature age-based investment choices that automatically adjust risk levels as your child nears college. These function similarly to target date funds in retirement accounts. If you have a financial advisor, keep them updated to ensure you remain on track for your savings goals. As your income increases, consider raising your contributions to the 529. Don’t hesitate to inform family members who give gifts to your child that you’d appreciate contributions to the 529 instead. Websites like giftofcollege.com and leafsavings.com simplify the process of contributing. Alternatively, they can simply write a check for you to deposit—every little bit counts.

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