Start A College Fund Early And Let Your Kid In On the Plan

Looking to the future? Starting a college fund is part of a successful education investment plan for investing in a lifetime.

Print
https://tickertapecdn.tdameritrade.com/assets/images/pages/md/
5 min read

College is an expensive proposition these days, so having a plan to pay for your kid’s education—even when it’s still far away—is paramount.

You’ll need to consider a college fund or some other educational investment plan such as a 529 plan or Coverdell savings plan. Those are investment vehicles, a first step in your total education investment plan. And it’s probably best to begin planning as soon as possible and get your child involved as well.

Formative Years

As you begin your family, or even before, think about how you’re going to get your child through his or her formative years, in addition to thinking about a college investment fund. Once your children are born, don’t wait too long to start saving. The sooner you can put your investment plan into action the more time you will have for potential growth.

As your child gets older, you might want to start talking about college investing and education investments with him or her relatively soon.

“It’s best to start the conversation before your children are teenagers on the brink of making important financial choices of their own,” says Tim Steffen, director of financial planning for Baird's wealth management division.

Modeling good behavior, such as letting your child see you actively putting money in their college investment fund or 529 plan, is one idea. Even for parents who automatically transfer savings to the account (something Steffen recommends to make saving easier), showing how this is done gets children involved. Also, start having conversations about budgeting and what type of school you think the family will be able to afford with the savings you expect to accumulate, he says.

Plus, these conversations may have a secondary benefit: They can help your child better understand the preparation and financial discipline that go into making an important purchase. This might put them in better shape later in life when they need to start saving for a car or home.

Guiding Dreams

The discussions need to ramp up as your child enters high school. Since you’ve already set the stage by talking to your child about finances and how money works, you can help guide their choices and school dreams.

“You have to be realistic with what you can afford,” Steffen says, noting that some colleges might not be affordable for your family. “It is such a different world when it comes to paying for school for kids now than it was a generation ago. The prices just don't compare. Even inflation adjusted, they don't compare.”

By high school, students can become active members in their education investment plan. In addition to savings, you both should explore other avenues for finances, such as the student getting a part-time job and saving that money, looking at academic and athletic scholarships, talking to grandparents, and potentially taking out loans. There are more academic scholarships than athletic scholarships available, and it is important to remember that actively researching available scholarships can take quite a bit of time.

Before asking if grandparents can pitch in, think back to how they helped you with paying for college; it might give you a sense of their willingness (or ability) to contribute to an educational investment plan.

Also, work-study programs or first attending a community college can help ease the financial burden. Sometimes going away to a big school can be emotionally overwhelming at 18, so community college can help with that life transition—and save on costs as your child works toward his or her bachelor’s degree. And don’t worry how it looks on a resume.

“I think employers are more concerned about where you ended your college career than where you began it,” Steffen says.

Education Resources, All in One Place

The cost of college is high, but an education account can help you invest toward paying for your child's college expenses down the road.

Call Us
800-454-9272

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services. 

An investor should consider a 529 college savings plan’s investment objectives, risks, charges and expenses before investing. The plan issuer’s official statement contains more information and should be read carefully before investing.

Investors should consider before investing whether their or their beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program and should consult their tax advisor, attorney and/or other advisor regarding their specific legal, investment or tax situation.  

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. TD Ameritrade does not provide tax advice.  

Investments in 529 plans are not guaranteed or insured by the FDIC, SIPC or any other government agency, and are not deposits or other obligations of any depository institution.  

adChoicesAdChoices

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.

Scroll to Top