Early college planning for a growing family

Bill Cass, CFP®, CPWA®

Bill Cass, CFP®, CPWA®, 08/17/22


As parents and students do their back-to-school shopping, the impact of rising inflation is being felt. Beyond near-term needs, parents of younger children have to consider the impact of inflation on long-term college funding needs. Most college students will graduate with some level of college debt. However, a thoughtful savings strategy can mitigate the amount of the debt burden in the future.

How families save is another important decision. Choosing among various types of accounts and investments can affect outcome, and families may want to consider seeking professional advice. Guidance from an advisor can be a key resource for identifying investment choices and savings strategies that are appropriate for your goals.

In a recent post, “Evaluating choices for funding college,” we presented a comparative look at some key college savings options.

Planning considerations for different ages of children

Infants and pre-school:

  • Some parents start saving even before a baby is born. With a 529 savings plan, for example, parents may establish an account using their own Social Security number and name their child as the beneficiary at a later date.
  • Starting early allows the account to invest through multiple market cycles. Parents may want to begin with a more growth-focused investment strategy to take advantage of a far-off horizon.
  • Saving with a 529 plan, even when a child is very young, offers the flexibility to use funds to pay for K-12 tuition (up to $10,000 per student annually), or a qualified apprenticeship, as well as college costs.
Elementary and middle school:
  • In addition to saving for education, continue to pay off debt, maintain emergency savings, and save for retirement.
  • Consider and revisit the time horizon and investment options for your short-term and long-term goals.
  • Explore some college savings calculators to get a sense of how much to save.
  • Ask grandparents and other family members to consider contributions to the college account for gift-giving/milestone occasions.
  • Consider utilizing a variety of savings vehicles to help you meet objectives. A Roth IRA may be used to save for both education and retirement.
For more detail on creating a college savings plan, read our piece, “Early college planning for a growing family.”

Helping children understand saving

While putting together a college savings plan, it’s also a good time to start teaching children the basics of saving and finances in order to develop good habits.

Preschool (ages 3 to 5)

Consider talking with young children about the financial value of items. If they break a toy, explain the difference between simply buying a new one or fixing the toy and putting the replacement cost toward something else.

Elementary and middle school (ages 5 to 13)

  • Introduce the concept of long-term savings goals. Consider setting up a piggy bank with separate sections for saving, spending, and donating to people in need.
  • Establish a “matching program.” Encourage your children to save at least half of the money they receive for gifts, and then match those contributions.
  • Take your children to the bank to open a savings account, and keep them updated as their savings grow.
For more information about 529 plans, see Putnam.com.

Putnam 529 plan

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