Saving for College: Planning Ahead for Education Costs
College can open doors to better careers and higher income, but it also comes with a big price tag. Tuition and fees continue to rise, and many families worry about how they’ll pay without overwhelming debt. The good news: with smart planning, you can prepare for education costs while balancing your other financial goals.
At Swan Lake Wealth, we help families align saving for college with their broader financial plan. Here’s how to approach it step by step.
Why Start Early?
The sooner you begin saving, the more time your money has to grow. For example, contributing just $200 a month for 18 years at a 6% average return could grow to nearly $77,000 — enough to make a major difference in covering tuition and fees.
Starting early also spreads the burden, so you’re not scrambling when college bills arrive.
Popular College Savings Vehicles
1. 529 College Savings Plans
These state-sponsored plans allow your money to grow tax-deferred, and withdrawals for qualified education expenses are tax-free. Many states also offer tax deductions for contributions. Funds can be used for tuition, books, and even some K–12 expenses.
2. Coverdell Education Savings Accounts (ESAs)
Similar to 529s but with lower contribution limits. They can also cover K–12 expenses.
3. Custodial Accounts (UGMA/UTMA)
Assets are held in the child’s name and can be used for more than just education. However, they may impact financial aid eligibility.
4. Roth IRAs
Though designed for retirement, Roth IRAs allow penalty-free withdrawals of contributions for education expenses. This can be a flexible option for families balancing multiple goals.
Balancing College Savings With Other Goals
While it’s natural to want to put your child’s education first, don’t sacrifice your own financial security. Retirement savings should remain a top priority. After all, your children can borrow for college, but you can’t borrow for retirement.
A balanced approach may involve contributing to both retirement and a 529 plan — even if the amounts feel small at first.
Tips to Make Saving Easier
Automate contributions to a college savings account.
Encourage family contributions for birthdays or holidays.
Use windfalls wisely (bonuses, tax refunds, extra income).
Apply for scholarships and grants to reduce out-of-pocket costs.
Bringing It All Together
Paying for college is a challenge, but starting early, choosing the right savings vehicles, and balancing priorities makes it manageable.
At Swan Lake Wealth, we help families create education savings strategies that don’t derail other goals like retirement or buying a home.
Ready to build a college savings plan that works for your family? Let’s create a strategy that makes higher education attainable without overwhelming debt.
