Saving for College: It’s Never too Soon to Start

Most teens are as stressed about going to college as you are about the cost.  Developing a strategy about how to pay for college will do wonders to reduce their anxiety about life after high school. It can also be a great way to teach your teen about the long-term value in making financially responsible decisions. Family Living Educator, Nancy Vance, provides a few great tips on how to get this process started in this week’s Parenthetical post.

When you look at your pre-teen or young adolescent, does it seem like only yesterday that they were in kindergarten, learning their sounds and letters and starting their school career? Well guess what?  That is how quickly college will seem to arrive with the junior year ACT/SAT exams and senior year college and FAFSA applications. Are you ready for that day or are you feeling like a deer in headlights?  If you have not been able to save for whatever reason – don’t stress – there is still time to make an impact on your teen’s college finances.  Recent research has shown that children with a college savings account are three times much more likely to attend college and earn a degree–no matter how much money is in their accounts.1 Even a small amount of savings ($500.00) put away for higher education can have an impact, encouraging children to start thinking about college and planning how to get there.

How can your family get started today?

One of the most important ways to get started is to initiate a discussion with your teen. Do you know what your child’s career goals are?  Is college or post secondary education even on their radar? You might be surprised at the answer.  This is also a great opportunity to talk about the value of college and to let them know that you support them in their chosen career path.

Most teens are as stressed about going to college as you are about the cost.  Developing a strategy about how to pay for college will do wonders to reduce their anxiety about life after high school.  Beginning to save for college can also help teens form “college-bound identities”–expectations about going to college and formulated strategies about how to get there. Just letting them know that you believe in their ability to get to college can have a powerful effect on their academic success in high school.

Because there are so many options available, deciding how much to save and what type of account to use can seem like a complicated decision. This complexity can get in the way of the most important thing–getting started. Developing the habit of saving for college can be as important as the amount you save or the type of account you open.

Because getting started can be so difficult, below are some suggestions to get the process underway:

  • Start saving, even if it is in small amounts. One of the easiest strategies is to find a little bit of extra money each month to put towards college savings. Helpful steps can include developing or reviewing your budget, starting to track spending, or simply using a change jar. Not surprisingly, the sooner you start, the more you can save. If you save $2/day in an account that earns just 1% interest, in 17 years you’ll have more than $12,400. Try to look critically at your spending and see if there is any place that you can cut back.  Do you need the expensive coffee each morning before going into work or could you save $2.00 a day by bringing a thermos of coffee with you?
  • Once you are committed to saving, pick a place to save. Families interested in college savings have a variety of options about where to put their savings. Options range anywhere from a change jar on your dresser or to more complex plans that may allow you to save on taxes. Start simple.  Empty your change each week into the change jar so that your child can see that you are saving for their college.  Work together on reaching your saving goals. To document success and build motivation, try charting the savings as it grows so that everyone in the family can see it.  As your savings increases, learn together about all of the different financial strategies that are available for college savings.
  • Get other family members (and friends) involved. Grandparents might be excited about opening 529 college savings plan specifically for your teen. Gently let relatives know that contributing to your teen’s college future can be a more valuable gift than buying another electronic gadget. Plus there can be some tax advantages for contributing to state 529 plans (Note: this varies from state to state).

However you get started, the most important question is, “What works for you? “ Most families can’t save the full amount needed for their child’s education.  Life happens and most of us have experienced financial stress at some time.

The total cost for one year at a 4-year Wisconsin public university (2015) ranges between $18,000 – $23,000, including tuition, books, food, rent, etc.  On average, it cost $9,000 more for students to attend a college or university in a state where they are not a resident (find more information here on current tuition prices.) As your child gets older, these costs will continue to rise.  According to Sallie Mae, the Student Loan Marketing Association that makes educational loans more widely available to college students, paying for college usually includes using a combination of different sources: saving some money ahead of time, paying some expenses out of current income, both parent and child taking out student loans and obtaining scholarships, gifts, or grants.  According to a study by Sallie Mae, “How America Pays for College,” scholarships and grants cover about 34% of total college costs and parents’ income and savings account for another 29%.

What types of accounts can be used to save for college?

529 College Savings Plans – Money saved in a 529 investment account can be used to pay for expenses like tuition, books, and certain room and board costs at almost any university. With automatic deposits, the minimum monthly contribution is only $15. Find out more on 529 College Savings Plans here.

Coverdell Education Savings Account – Also known as an Education Savings Account (ESA), these  investment accounts can pay for college expenses plus private school tuition at elementary or secondary school.

U.S. Savings Bonds – These can be purchased at or with your tax refund when you file your income taxes. They can be used for college or other savings. Interest earned may be exempt from federal income tax if bond proceeds are used to pay the beneficiary’s qualified education expenses, provided certain other conditions are met.

Traditional Savings Account – Obtained from a bank or credit union.  You can withdraw your money at any time for any reason. Such accounts can be set up so that a specified amount each month can be allocated to it from another account or paycheck.

What can your teen do?

It helps if your child has some “skin in the game” and realizes that this is a team effort. Explore with your teen some of the ways they can contribute to a college savings account. They might come up with some very creative ideas on how they can earn some extra money or contribute a part of money that they receive.

Gifts – birthday and holiday gifts (or some percentage of) could be put into a college savings account (click here for more on teen saving).

A Part-Time Job – jobs are a great way for teens to get professional experience and financial support of their own, possibly with part of the savings going toward college. Check out this past Parenthetical post for more information on teen employment.

Grants and Scholarships– there are numerous grants and scholarships that college-bound high school students can apply for. Although many of these opportunities are awarded in small amounts, they begin to add up. Encourage your teen to do some research on their own and see what is out there! If it all gets a bit too confusing for them, have them set up a meeting with a high school guidance counselor for additional support—that’s what they are there for! Check out a list of grants and scholarships here.

It’s never too late to start saving, planning and talking to your teen about their future.  Over the next decade, nearly 8 in 10 jobs in the United States will require some workforce training or postsecondary education, according to a Federal study on “Jobs and the Economy.” Even if your child is undecided about college, your interest in their future will help then realize that they are not alone in figuring all of this out. Their future is important.  Go team!

Here are some other great resources with ideas on how to save for college:


1Elliott, W., Song, H-a, & Nam, I. (2013). Small-dollar children’s saving accounts and

children’s college outcomes by income level. Children and Youth Services Review, 35(3), 560–571.


Article written by Nancy L. Vance, M.S.


Nancy Vance is the Family Living Educator for Clark County, WI.  She is a graduate of the University of Illinois with both a Master’s of Science degree and a Bachelor of Science degree in the area of Family and Consumer Science.  Nancy has had many diverse careers in the field of Family Science but most recently, she was the program director for a domestic violence agency in Illinois where she worked with families impacted by violence and abuse.