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Start Saving for College--Now!

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The costs of higher education can be—well, scary! If you haven’t started saving yet, they can be downright terrifying. They don’t have to stay that way, though. Let’s talk about a few of the best ways to start saving and keep the money monster at bay.

The King of All Savings Plans: The 529

Every state in the U.S. offers a 529 Plan, a savings plan specifically for education costs which features tax-free investment growth based on market stock funds. 529 funds are exempt from both state and federal tax, as long as you use them for school tuition and related costs. Some states offer you a choice of two or three plans, while some only have one. Each 529 fund is slightly different, so make sure you educate yourself about yours. Unfortunately, even if surround states can offer better deals on their 529s you’re generally only allowed to participate in the plan in your state of residence.

Compared to other kinds of savings accounts, 529s have relatively little impact on your aid eligibility. When evaluated with the FAFSA (the main financial aid form in the U.S.), they are assessed at 5.6%—as opposed to student-owned savings, which are assessed at 20%. Each individual can put up to $12,000 a year in a 529 for each child without any tax consequence. Therefore, two parents can put in $24,000 per child. Grandparents can maintain a 529 account for a grandchild, protecting the money from taxation, even though it is not included on the FAFSA.

Other Savings Plans

A Coverdell Education Savings Account is another kind of college savings account that does not have any taxes on withdrawal. Although the annual contribution limit is only $2,000, Coverdells can be used for high school education as well, and are a nice alternative to the 529 if there’s a chance of going to a private high school. Contributions are not deductible. Ask at your local bank for more details to make the most of a 529, Coverdell, or combination.

Money from Family Members

If any other family members (grandparents, aunts, uncles, etc) wish to contribute to college expenses it may be tempting to get the money into your savings account, but actually you’re better off having them hold onto the funds until after your financial aid package is complete. Unlike with parents, there is no legal expectation that grandparents and other relatives will contribute to college, so if you don’t have the money yet, it won’t count against your perceived need.

Scholarships and Grants

A too-often-overlooked piece of preparing financially for college is applying for scholarships and grants. A small minority of the students who are eligible to apply actually do so. Talk to high school counselors about available funds in your community, and research other options on your computer. If you have any unique talents and experiences, explore whether they might help you financially. Let’s say you are a high altitude snowboarder: google “college scholarships” + “snowboarder” and see what comes up. There are lots of scholarships for snowboarders! You can try the same technique with almost any strength you have, from sheep breeding to art therapy.


At the end of the day, the best way to save money for college is to just do it. If you (the student) earn money while you’re still in high school, make a practice of putting aside a chunk of your paycheck every single time you get paid. If you are a parent saving for your child, do the same. And while a 529 or Coverdell is ideal… money in any kind of an account is better than no money at all and will help get that money monster back eating dust bunnies under the bed where he belongs.


Elisabeth Bailey+

Elisabeth Bailey is a freelance writer and editor with particular interests in academics, food,and sustainability . She is also the author of A Taste of the Maritimes: Local, Seasonal Recipes the Whole Year Round and writes regularly for Canadian Farmers’ Almanac and the National Wildlife Federation. Elisabeth and her family live and enjoy great local food in Lunenburg, Nova Scotia.

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