What Are the Best Ways to Save for College?

Planning for college costs can feel overwhelming, but knowing the best ways to save for college can help you take control of your child’s (or your own) future. With tuition, fees, housing, and other expenses on the rise, it’s essential to start early, understand your options, and make strategic decisions to ease the financial burden. 

Whether you’re a parent, guardian, or student, this guide will walk you through proven strategies to help you save effectively and confidently.

Key Takeaways

• Start saving early to take advantage of compound interest and long-term growth.
• 529 plans offer tax advantages and flexible spending options for education.
• Creative solutions, like cashback rewards and crowdfunding, can supplement traditional savings.
• Budget-friendly strategies can help families of all income levels make steady progress.
• Collaboration between parents and students boosts savings success.
• It’s never too late to begin planning and saving for college expenses.

Understanding the Cost of College Today

Saving for college begins with understanding the financial landscape. The cost of higher education in the U.S. has steadily increased, making it more important than ever to plan ahead. College expenses include more than just tuition—they also encompass housing, meal plans, books, supplies, transportation, and personal expenses.

According to the Trends in College Pricing and Student Aid 2023 report, the average annual tuition and fees for full-time undergraduate students are: 

• Public four-year in-state colleges: $11,260
• Public four-year out-of-state colleges: $29,150
• Private nonprofit four-year colleges: $41,540 

When you factor in room and board, the total annual cost can range from $25,000 to $60,000+, depending on the school and location.

In addition to the published tuition rates, many families encounter hidden or fluctuating college expenses, such as:

• Textbooks and supplies
• Technology fees and lab costs
• Study abroad programs or internship travel
• Health insurance and medical expenses
• Personal and recreational costs 

Knowing the realistic cost of college gives you the power to prepare effectively and avoid financial surprises down the road.

How to Start Saving Early for College

Starting early gives your savings time to grow through compound interest and investment returns. Here’s how to get started:

• Set a goal: Estimate future college costs using online calculators.
• Open a dedicated account: Avoid mixing college funds with general savings.
• Automate contributions: Schedule monthly transfers to stay consistent.
• Review and adjust annually: Life changes and financial shifts may impact your plan.

Top College Savings Plans and Accounts

Choosing the right way to save for college can have a big impact on both tax benefits and how much your money grows over time. Here are some of the top options:

529 Plans: Tax-Advantaged Savings

529 college savings plans are state-sponsored investment accounts offering tax-free growth and tax-free withdrawals for qualified education expenses. As of June 2024, the average 529 plan account balance was approximately $30,295, with over 16.8 million active accounts nationwide. This growing adoption shows how effective these plans can be for families preparing for future education costs.

Benefits include:

• Federal and sometimes state tax advantages
• High contribution limits
• Transferable to another beneficiary

Ideal for: Long-term savers wanting tax-efficient growth and flexibility.

Coverdell Education Savings Accounts (ESAs)

Coverdell ESAs are tax-advantaged accounts designed to help families save for education expenses, including K–12 and college. Although contribution limits are low, ESAs offer more flexibility in the types of expenses covered.

If you contribute $2,000 annually for 18 years with a 7% return, your account could grow to approximately $72,758.

Benefits include:

• Can be used for K–12 and college expenses
• Tax-free growth and withdrawals for qualified education costs
• Wide range of investment options
• Covers expenses like tutoring, school supplies, and tuition

Ideal for: Families with modest income looking for broader educational coverage, including primary and secondary education.

Custodial Accounts (UGMA/UTMA)

UGMA and UTMA custodial accounts allow adults to save and invest money on behalf of a minor. While not limited to education, the funds must be used for the benefit of the child.

Benefits include:

• Funds can be used for any expense that benefits the child—not limited to education
• No contribution limits
• Easy to open and manage through banks or brokerages
• Full control transfers to the child at the age of majority

Ideal for: Families seeking a flexible savings option for a variety of future expenses beyond education can explore college savings options.

Creative Ways to Save for College Expenses

While traditional savings accounts and education plans are powerful tools, they aren’t the only ways to build a college fund. Incorporating creative financial planning can help supplement your efforts and ease the financial burden. These strategies offer unique ways to stretch your budget, engage others in the process, and make every dollar count.

Cash-Back and Rewards Programs

Everyday spending can translate into college savings when you leverage cashback and rewards platforms for higher education expenses.

One example is Upromise, a program that links to your purchases and automatically sets aside cashback for college. Over the past two decades, its members have collectively earned over $1.1 billion in rewards to help pay for education.

Benefits include:

• Some credit cards and apps, like Upromise, allow you to earn cashback that’s automatically deposited into a linked 529 plan
• Retailers often offer special education-related promotions or savings events
• You’re turning regular purchases—groceries, gas, bills—into future tuition support

Ideal for: Families who want to maximize savings without changing their spending habits.

Crowdfunding Education Costs

Crowdfunding allows friends, family, and even generous strangers to contribute toward education expenses through online platforms.

In 2024, nearly 40,000 individuals and organizations received assistance with tuition and loan repayment through GoFundMe fundraisers, reflecting the growing reliance on community support for educational expenses.

Benefits include:

• Websites like GoFundMe Education, Gift of College, and GradSave make it easy to share your story and receive support
• Ideal for birthdays, holidays, or graduation gift requests
• Contributions can be tax-deductible for donors (depending on platform and setup)

Ideal for: Families with strong social networks or compelling education goals who are comfortable sharing their journey online.

Scholarships and Grants

Applying for scholarships and grants is essentially earning free money for college, reducing the need to dip into your own savings.

In fact, 80% of all undergraduates receive at least one grant or scholarship to help reduce student loan debt. 

Benefits include:

• Scholarships are available for all age groups, interests, and academic levels
• Many local organizations and employers offer under-the-radar opportunities
• Reduces reliance on loans and personal contributions

Ideal for: Students who are proactive, academically engaged, or involved in extracurriculars, and families seeking no-cost funding sources.

Saving for College on a Budget

You don’t need a big paycheck to build a meaningful college fund. Saving on a budget is about making smart, consistent choices that add up over time. Here are practical ways to start, even if money is tight:

Set Monthly Savings Goals

Decide on an amount you can realistically save each month. It could be $25, $50, or whatever fits your budget. Automate contributions to a dedicated savings account or 529 plan so the process is hands-off and consistent. Even small amounts grow with time and discipline.

Cut Everyday Expenses

Review your spending habits and look for small changes that free up money. Cancel unused subscriptions, limit dining out, and take advantage of sales or cash-back apps. Use a budget tracker to see where your money goes, and where you can make adjustments.

Use Windfalls Wisely

Treat unexpected income like tax refunds, bonuses, or birthday gifts as an opportunity to boost your college savings. Allocating even a portion of these windfalls, say 30% to 50%, can accelerate your progress without straining your regular budget.

Take Advantage of Free Tools

Apps like Acorns, UNest, or your bank’s round-up feature can help you save by automatically rounding up purchases to the nearest dollar and saving the difference. These passive tools are ideal for families who want to save without constantly thinking about it.

Involve the Whole Family

Encourage children to contribute part of their allowance, gift money, or summer job income to their future. Even small deposits help build a mindset of shared responsibility and commitment to their education.

Look for Matching or Incentive Programs

Some states and employers offer matching contributions for college savings. Check if your state’s 529 plan or your workplace offers any incentives—you don’t want to leave free money on the table.

How Parents and Students Can Work Together to Save

Saving is more effective when it’s a joint effort. Here are smart ways parents and students can team up:

• Talk about costs early: Discuss tuition, living expenses, and who will cover what.
• Set shared goals: Decide on a target amount and timeline together. Track progress regularly.
• Split contributions: Parents can handle tuition or housing; students can cover books, supplies, or meals.
• Encourage part-time work: Students can take summer jobs or work-study roles to save money and build responsibility.
• Apply for scholarships: Make it a team project to search and apply, set a goal for weekly submissions.
• Involve extended family: Ask relatives to contribute to a 529 plan or give savings-based gifts for birthdays and holidays.
• Reward milestones: Celebrate when goals are met, like reaching a savings target or winning a scholarship.
• Adjust by age: Under 10 (focus on building parent-led savings), ages 10–15 (teach budgeting and saving, 16+ (encourage earnings and financial planning).
• Use budgeting tools: Try apps like Greenlight or BusyKid to build smart money habits early.
• Explore low-cost school options: Look into community colleges, in-state universities, or schools with strong aid packages.

Final Thoughts: Making Smart College Saving Decisions

Saving for college doesn’t have to be overwhelming. By starting early, choosing the right savings vehicles, and making informed financial decisions, you can ease the burden of college costs. Whether you’re setting aside a little each month or looking for creative ways to boost your savings, every step counts. It’s never too late—or too early—to start planning.

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Frequently Asked Questions

What is the best age to start saving for college?

The best time is as early as possible, ideally at birth. The earlier you start, the more time your money has to grow through compounding.

Can I use a 529 plan for K–12 education?

Yes. You can use up to $10,000 per year from a 529 plan to cover K–12 tuition at eligible institutions.

What happens to unused college savings funds?

Options include:

• Transferring to another family member
• Using for graduate school
• Withdrawing (subject to taxes and penalties on earnings if not used for qualified expenses)

What is a 529 plan and how does it work?

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college expenses. It is named after Section 529 of the Internal Revenue Code. There are two types of 529 plans: prepaid tuition plans and college savings plans. A college savings plan allows you to save money in an investment account, while a prepaid plan lets you prepay for tuition at today’s rates. The money saved in a 529 college savings plan can be used for qualified education expenses, which include tuition, fees, room and board, and books.

What are the tax benefits of a 529 plan?

One of the major advantages of a 529 plan is the tax benefits. Contributions grow tax-deferred and withdrawals for qualified education expenses are tax-free. Additionally, many states offer tax deductions or credits for contributions made to a 529 college savings plan. This means you can save money on your state taxes while saving for your child’s higher education.

What are other effective ways to save for college?

Besides a 529 plan, other effective ways to save for college include setting up a savings account specifically for college savings, utilizing a Coverdell education savings account, or investing in savings bonds. Each of these options has its own benefits and can complement a 529 plan to help you reach your savings goal for college tuition and other education expenses.

How much should I save for college?

The amount you should aim to save for college varies based on several factors including the type of institution your child plans to attend, potential college costs, and your financial situation. A good start is to estimate the total college expenses by looking at current tuition rates and projecting future costs. The 10 best ways to save often suggest saving at least one-third of the projected total through a mix of savings options and financial aid.