When our son started kindergarten, we sighed with relief. Eliminating the monthly preschool tuition meant we had extra dollars each month. If you’re in the same situation, consider putting at least some portion of that tuition money toward saving for college.

In fact, at any point that you pay off a debt or end a financial commitment — whether it’s preschool, a car payment, a credit card, or a mortgage — consider starting or increasing your contributions to your child’s college savings plan. Since you were already paying that money each month anyway, you’re less likely to miss it.

How much should you be saving? The answer depends on many factors including your family’s financial situation. But it’s safe to say that any amount you can save will help. According to the Department of Education, tuition, fees, and room and board averaged $18,632 per year at four-year public institutions and $37,990 per year at four-year private institutions in 2014-2015. Before you panic, it’s important to understand that most parents don’t save their child’s entire college tuition before school starts. One savings “formula” promoted by the financial service corporation Fidelity is the “2K rule.” Fidelity suggests multiplying your child’s age by $2,000 to come up with a ballpark figure for how much savings you should have at any given time in order to cover half the cost of sending your child to a four-year public university in your home state. Other experts say this isn’t nearly enough. While $36,000 is unlikely to cover the cost of four years of college, it may do the job when combined with grants, student loans, and student earnings.

If you haven’t started saving for college yet, don’t be discouraged. By taking these nine steps now, you’ll be off to a great start.

  1. Start a college savings account

    Just begin. You can save change in a jar, open an interest-earning bank account, or open a tax-advantaged college savings account like a 529 plan. (See #2 for more.) If your older elementary school child gets an allowance, encourage him to put a dollar a week into the pot — studies show that kids who participate in saving money for college — no matter the amount — are more likely to go.

  2. Consider a 529 college savings plan

    The benefit of these tax-advantaged savings accounts is that the money you contribute and invest can (and hopefully will) grow over time, and when you withdraw the money, you won’t have to pay federal taxes on the earnings — so long as you use the funds for qualified education expenses, like tuition, room and board, and even a new laptop for college. You can choose a 529 plan from any state (check collegesavings.org to see the various options), but your own state generally offers the best tax advantages. Many parents choose the age-adjusted 529 plans, which gradually shift from more aggressive investments to less risky investments as your child approaches the start of college. If your child decides not to attend college, you can transfer the funds to pay for another family member’s education. Otherwise, you will have to pay a 10 percent penalty on the earned portion of the savings and you’ll have to pay taxes on your withdrawals.

  3. Put the 529 plan in your name, not your child’s

    Beth Kobliner, a personal finance expert, former Money magazine reporter, and author of two New York Times bestsellers on kids and money, offers this tip in one of her books. When you apply for financial aid, she writes, the federal formula expects students to contribute 20 percent of their savings to college, while parents are only expected to contribute 5.6 percent of theirs. That means that the same amount of money in a 529 plan in your name will have less of an effect on how much financial aid your child receives.

  4. Give as much as you are comfortable with

    Experts suggest contributing as much as you comfortably can, and increasing your contribution whenever possible. Parents who save $310 a month in a 529 with 8 percent interest can expect to save about $150,000 in 18 years due to compounding interest. However, that same parent who starts saving when their child is 10 would have to put away about $1,100 a month to build the same college nest egg. The takeaway? The earlier you start saving, the easier it’ll be.

  5. Make the monthly savings automatic

    Research shows that a set-it-and-forget-it approach — like setting up an automatic transfer of part of your paycheck into a college savings account each month — works much better than trying to remember to do it on your own, or deciding each month whether or not to do it. If your employer doesn’t offer an automatic payroll deduction for 529 plans, consider setting up a monthly transfer between your checking account and your savings account.

  6. Get grandparents on board

    If your child’s grandparents are in a position to help, suggest they contribute to your 529 plan. Some 529 plans even provide gift-certificate forms that you can send to family members to encourage them to make contributions to your child’s plan. Grandparents can also set up their own 529 for your child, but Kobliner doesn’t recommend it. The advantage of a separate grandparent 529 plan is that those assets don’t count toward financial aid calculations until they are used. But once they’re used, they can affect financial aid awards negatively because the federal formula will count those funds as student income, and students are expected to contribute 50 percent of their income toward college. If those same funds were in a 529 plan in your name, the federal formula would only expect the college contribution to be 5.6 percent.

  7. Don’t neglect saving for retirement

    Don’t rob Peter to pay Paul, as the old cliché goes. Americans are living longer than ever, and you’ll need to build a solid nest egg for yourself as well. And while student loans exist, retirement loans really don’t.

  8. Talking about saving for college with your child

    Talk with your child about the importance of saving for things we really want, Kobliner suggests. That includes college. “Research shows that when you tell a child you’re saving for college, that child is more likely to go on to college regardless of how much money is actually in the account. It has a motivational impact on children,” she says. Also, saving is easier when you talk about the importance of what you’re saving for. If that’s a part of your family’s conversation, everyone will feel on board with making it a priority.

  9. Connect your child’s interests to their (possible) future

    Kobliner suggests linking your child’s interests to potential careers and college degrees in an age-appropriate way. Does your daughter love animals? Maybe she would like to be a veterinarian one day. Talk to her about what it takes to become a vet. If your son loves microscopes, discuss a possible career in biology.

    “By 4th or 5th grade, you can also explain to kids that people who go to college generally earn about a million dollars more over their lifetime than people who don’t graduate from college,” says Kobliner. “Make that part of what you say, not in a pressured way, but talking about how [going to college is] an expectation and it’s a wonderful thing.”

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Updated: June 18, 2019