How to Save for My Kids’ College

Every parent dreams of giving their children the best possible future. For many, this includes providing a college education that allows them to make a good living. Even when kids are still young and their college years feel far-off, it’s important to start the planning process. 

Figuring out how much we need to save for college can be complicated. Tuition varies from one university to another, and there are a multitude of financial aid options to investigate and apply for. With the help of our guide, you’ll be able to estimate how much you need to save for your children’s higher education and pave the way for them to have a successful future.

Why is it important to save for college?

The costs of attending college are high and seem to be continuing on an upward trend. But this doesn’t mean that a higher education is out of your children’s reach. With time and proper planning, you can implement a savings plan that contributes to your kids’ professional development.

With their college expenses covered, students are able to focus on their academic development. This also allows them to start their adult life free from debt and with better opportunities ahead.

How much should I save for my kids’ college?

It’s important to remember that college costs vary, depending on the school that your children choose. Although a higher education is expensive, the value of a college degree goes well beyond its costs because it offers professional and networking opportunities. 

This should help motivate you to begin preparing early, while your kids are still young and you have time to save.

Research the costs of different colleges 

If college savings are a goal for you and your family, the first step to reach this objective is to research the costs of different colleges. With a dollar amount in mind, it’s easier to track your progress and stay motivated to achieve your plan.

When kids are still young, there’s no way to know which college they’ll attend. You still have many years ahead to discover their academic interests and school preferences. However, parents can use average college prices to create a savings plan that’s effective and realistic.

What are those costs? According to a study by the U.S. Department of Education, average annual tuition at a public university is $18,383. This same study lists an average yearly cost of $47,419 for private colleges.

How much should I save every month?

Once you’ve determined the average cost of the higher education that you want to save for, you’ll need to create a monthly savings plan. Assuming that your baby was just born and that you don’t have any savings yet, we’ve figured out the sample costs for two different schools. In our samples, we used the prices of Harvard University and also the approximate cost of local University. 

With all this information, it’s possible to figure out how much you must save every month to cover the college expenses of your child at age 18. We also factored in annual tuition increases of 3.5% and 4.5%, respectively. This will give us a realistic tuition estimate for when your kids attend college.

The following table breaks down the cost of a school year at Harvard, according to their website:


Cost during the 2021-2022 school year











Estimated Personal Expenses (including $800-$1,000 for books)


Estimated Travel Costs


Total Costs


Aside from these expenses, students must also have private health insurance or purchase an insurance plan from the school. The cost of this plan is $4,000 for the 2021-2022 school year. But, since many students have their own health insurance, we’ve excluded this cost from our example.

Using Harvard’s current prices, we can calculate the cost of a 4-year degree 18 years from today. We can also compare these prices with the average cost of a local university, according to the U.S. Department of Education:


Price 2021-2022

Years of School

Years to Start

Annual Increase






Local university





As the cost of education goes up every year, your investments will too. Your account growth will depend on market conditions and the risk level that you choose. For our example, we’ve used a conservative rate of 5% per year.

With an annual growth rate of 5% and 18 years ahead, we would need to save $1,626 per month to pay for your child to attend Harvard for four years.

If the goal is to pay for public university, we would need to save $368 per month for 18 years. For these calculations, we’ve assumed 5 years of school and an annual tuition increase of 4.5%.

Types of college savings accounts

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With a defined monthly savings goal, it’s time to open an account and start working toward your goal. There are several types of college savings accounts and it’s important to understand the differences and benefits of each. The following are the two most popular types of accounts for parents to save for their kids’ higher education.

529 Plans

Especially designed to cover college costs, 529 plans are state-sponsored investment accounts. You can invest in any state’s 529 plan, though some offer tax benefits for their residents. Most of these plans require a Social Security Number (SSN) or an Individual Tax Identification Number (ITIN).

According to the Consumer Financial Protection Bureau, there are two types of 529 plans. The first is a Savings plan that allows you to invest in a variety of portfolios. With this type of plan, your children will be able to pay for the college of their choice using your contributions plus the interest accrued.

These are some of the benefits of a 529 Savings plan: 

  • The account grows tax-free.
  • The funds can be used for any college or university.
  • The money saved can be used to pay for tuition, books, and other college expenses.
  • You can open an account in any state, even if you’re not a resident of the sponsor state.

Another type of 529 plan is the Prepaid Tuition Plan. When you invest in these plans you’re buying university credits at today’s prices, for your children to use in the future. These credits are for a specific university; but, if your child decides to go to a different school, there are ways to transfer the funds.

Payment methods for a 529 Prepaid Tuition Plan are:

  • Lump sum payment for the full amount;
  • a 5-year payment plan; or
  • fixed monthly payments.

Coverdell Education Savings Accounts

Coverdell Education Savings Accounts (Coverdell ESA) are trust or custodial accounts that you can use to pay for higher education. According to the IRS website, these are the requirements to open a Coverdell ESA:

  • The beneficiary must be under the age of 18 or have special needs when the account is opened.
  • The account must be designated as a Coverdell ESA from the beginning.
  • The account must be established and governed by a written document with certain requirements.

Although the funds in these accounts grow tax-free, it’s important to point out that contributions made to a Coverdell ESA are not tax deductible. You should also keep in mind that these accounts have a maximum annual contribution amount of $2,000.

Getting financial aid

On top of savings, college students may be eligible for other types of financial aid. These include scholarships as well as government grants and loans. It’s important to understand all the options available to you, because these can help cover some of your child’s college costs or supplement family savings.


One of the most common forms of financial aid is a scholarship, which is a grant made to support a student's education, awarded on the basis of academic or other achievements. They can be a huge help for families trying to cover the cost of their children’s higher education. Some are sponsored by private institutions, others come from nonprofit organizations, and others are offered by schools. 

The U.S. Department of Labor website features a search tool where students and parents can find information about scholarships and grants available.


Certain college programs qualify for federal and state grants that students don’t need to pay back. If your children are interested in these fields of study, they can use the government website grants.gov to submit an application.

If you need help in writing a grant proposal this guide from the University of North Carolina at Chapel Hill provides step-by-step instructions and useful advice to help you complete the process.


The U.S. government offers federal loans for students who demonstrate financial need. These funds must be paid back according to the pre-determined terms and conditions. The interest rate varies depending on each student’s situation. To request a loan, you can visit the Free Application for Federal Student Aid (FAFSA) website.

Those who don’t qualify for federal loans can request a personal loan from a financial institution. The amount and terms of this loan will depend on your credit history.

Tips to save for your kids’ college

With the following tips you’ll see that saving for college is achievable and that your efforts can contribute to your children’s academic success.

Start saving as early as possible

The more time that you have to grow your savings, the better. If you start saving when your children are very young, you’ll be able to set a smaller monthly amount aside knowing that time is on your side. In the long run, this strategy will allow you to invest more capital and receive more interest.

Cut back on unnecessary expenses

If the idea of saving every month seems challenging, it’s time to review your family budget. Remember that college savings can change your children’s future, the sacrifice is worthwhile.

Some expenses that are easy to live without include: cable TV, dining out, and monthly subscriptions to inessential services. These are known as discretionary expenses, and you can adjust them when needed. They differ from your rent, food, or other fixed costs that are necessary for everyday life and are typically much harder to reduce. 

Get financial advice

Getting help from a financial advisor can help you build a better roadmap for your finances and therein your children’s academic opportunities. These experts have the know-how and experience to create a plan that helps you reach your goals and maximize growth. Before selecting an advisor, however, we encourage you to do your research, look up reviews (if they’re available) and find the one that matches your needs. 

Take control of your finances with the PODERcard 

Discipline is the key to savings. An easy solution is to schedule automatic monthly transfers from your PODERcard to your child’s college savings account. With a fixed monthly amount, it becomes easier to budget, save, and achieve your goals.