If you’re a new parent, there’s probably a lot on your mind—sleep schedules, diaper changes, and first milestones. But there’s one more thing that deserves a spot on your radar: college tuition.
It may feel like a distant concern, but the reality is this: you only have 18 years to prepare.
And with the rising cost of higher education, every year counts.
College Costs Are Climbing
College tuition isn’t getting any cheaper. In fact, the cost of attending a four-year university—whether public or private—has steadily increased over the years. According to the College Board, the average annual cost of attending a public in-state college is over $27,000, and private universities can easily exceed $55,000 per year when you factor in tuition, fees, room, and board.
Multiply that by four years, and you're looking at a six-figure expense.
So, how do you prepare?
The Power of Starting Early
The best tool you have on your side right now is time. The earlier you start saving, the more time your money has to grow through the power of compound interest.
Let’s break it down:
Saving $200/month starting at birth can grow to nearly $80,000 by the time your child turns 18 (assuming a 6% annual return).
Wait until they’re 10 years old to start? That same monthly contribution might only grow to $25,000.
Starting early can make the difference between a solid head start and a financial shortfall.
Consider a Tax-Advantaged Education Account
Two of the most popular accounts to save for education are the 529 Plan and the UTMA (Uniform Transfers to Minors Act) Account.
529 Plan: Tax-Deferred Growth with Education Perks
Earnings grow tax-free, and withdrawals are also tax-free when used for qualified education expenses (tuition, books, room and board, and more).
Some states even offer state income tax deductions for contributions.
Funds can be transferred to another beneficiary if your child doesn’t use them.
As of 2024, up to $35,000 in unused funds can be rolled into a Roth IRA for the beneficiary, if conditions are met.
UTMA Account: Flexibility and Ownership
This custodial account allows you to invest on behalf of your child.
Funds can be used for anything that benefits the child—not just education.
There’s no penalty for non-education use, but earnings may be subject to taxes, and once the child reaches the age of majority, they gain full control.
Which One Is Right for You?
If you want maximum tax efficiency and are confident the funds will go toward education, a 529 plan is a great choice.
If you want more flexibility in how the funds are eventually used and are okay with your child gaining control of the account at adulthood, a UTMA account may be worth considering.
Some parents even use both accounts to diversify how they fund future goals.
Final Thoughts
Eighteen years may seem like a long time, but when it comes to saving for college, the clock is already ticking. Starting early doesn’t just ease the financial burden—it also opens up options and opportunities for your child’s future.
Open the account. Set a realistic monthly contribution. Let time and compounding work their magic.
Because when that acceptance letter arrives, you’ll be glad you started today.
Compound interest illustrations are not predictions of investment performance, and investment principal and interest are not guaranteed and are subject to market valuation. The fees, expenses, and features of 529 plans vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient's marginal rate and subject to a 10 percent penalty. By investing in a plan outside of your state of residence, you may lose state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.
Ready to Schedule a Meeting?
Click here or the photo below to schedule an in-person, virtual, or phone call meeting.
We look forward to working with you!
