A young mother and father sit outside with their infant son on a warm fall day.

How to Save for a Child's Education

05/23/2025

Start building your child's college fund now to ease future tuition stress and keep your own finances on solid ground.

With a new baby at home, you’re likely spending a lot of time thinking about things like feeding schedules and diapers. Kindergarten, no doubt, feels far off — making college feel like a distant dream. But planning for your child’s education now — even in small ways — can make a big difference down the road. Starting a college savings plan early gives you more time to save, more flexibility to adjust and more peace of mind knowing you’re investing in your child’s future.

"I recommend putting a college savings account on the list of must-haves for new parents — right along with a car seat, stroller, baby monitor, crib and so on," says Patricia Roberts, author of Route 529: A Parent’s Guide to Saving for College and Career Training with 529 Plans.

Here’s how to get started saving for college or higher education.

Consider a 529 Education Savings Plan

For many families, opening a 529 college savings plan is a smart first step. These state-run accounts offer powerful tax advantages: Your money grows tax free, and qualified withdrawals are exempt from federal income tax. More than 30 states provide additional income tax benefits for contributions. You can check your state’s rules here.

Once you’ve opened a 529 account for your child, anyone can contribute to it — parents, grandparents, other relatives and even family friends. Contributions are not subject to income limits or age restrictions, making 529s a flexible tool for long-term savings.

While there’s no annual cap on how much you can contribute, federal gift tax rules still apply. In 2025, you can contribute up to $19,000 per year per recipient — or $38,000 if you’re married and filing jointly — without needing to file a federal gift tax return. (Some states impose limits on total contributions to the account.)

If you want to contribute more than that, you can take advantage of a special "superfund" provision that allows you to make five years’ worth of gifts in one lump sum — up to $95,000 in 2025 for individuals or $190,000 for couples filing jointly —without triggering gift taxes.

If your child doesn’t end up needing the funds for school, you’ve got options. You can roll the balance into another family member’s 529 account, or you may be able to transfer up to $35,000 of what’s left into a Roth individual retirement account (IRA) for your child, though restrictions apply.

Explore Other Education Savings Accounts

While 529 plans are a popular — and powerful — choice for education savings, they’re not the only option. Depending on your financial goals and timeline, you may prefer other ways to save for your child’s future.

Here’s a look at several savings products that could complement or replace a 529 plan:

  • High-yield savings accounts. These accounts for your kids don’t come with tax perks, but they’re simple, accessible and highly flexible. You can withdraw funds at any time for any purpose, whether that’s for tuition, a laptop or an unexpected expense. They’re a great short-term or supplemental option, especially if your child is nearing college or you’re not sure whether higher education will, in fact, be part of their future.
  • Roth IRAs. Primarily intended for retirement savings,Roth IRAs can also be used to help fund education costs. You can withdraw contributions penalty-free for any expense — including college tuition.However, there are a few caveats: Annual contribution limits are relatively low ($7,000 in 2025, or $8,000 if you’re 50 or older). And while withdrawing earnings before age 591/2 for higher education expenses may not trigger penalties, you’ll generally still owe income taxes.
  • Custodial accounts. These accounts, created under the Uniform Gifts to Minors Act, let you transfer assets to your child while maintaining control until they reach adulthood (age varies by state). The funds can be used for anything that benefits the child, not just education. But there’s a trade-off: Custodial account assets legally become the child’s once they reach the age of majority and could impact their financial aid eligibility.

Don’t Ignore Other Financial Goals

Don’t let the thought of "How to invest in my child’s education" take away from other financial goals of yours. As important as it is to save for your child’s future education, it should be only one part of your larger financial plan — and it shouldn’t come at the expense of your own financial well-being. Indeed, one of the best ways to support your child’s long-term success is by making sure your own financial foundation is strong.

Before prioritizing college savings, take care of the essentials:

  • Build an emergency fund with three to six months’ worth of living expenses.
  • Pay off high-interest debt, especially from credit cards.
  • Contribute regularly to your own retirement accounts.

Once those pillars are in place, you can work college savings into your monthly budget . Decide what’s realistic for your household and consider setting up automatic transfers to a dedicated account earmarked for college (whether that’s a 529 plan or another type of account). Automating the process makes it easier to stay consistent, and even small contributions can add up over time.

And don’t be afraid to invite others into the process: "With 18 birthdays and dozens of holidays between birth and college, there will be plenty of opportunities for those who love your child to make contributions," says Roberts. "Every contribution represents one less dollar your future student will need to borrow and repay with interest."

Another piece of the long-term preparation puzzle? Estate planning. As you grow your child’s education savings, it’s a good idea to think about how those funds — and other assets — will be managed in the future. Creating or updating your will and trust, naming a guardian for your child and designating account beneficiaries are all important ways to protect your family’s financial future. It’s not just about planning for college, it’s about making sure your child is financially supported, no matter what life brings.

Just remember that you don’t need to have it all figured out on day one. The important thing is to start — whether it’s researching your state’s 529 plan, setting aside your first $50 or asking family to pitch in instead of buying more baby toys.

How to Start Planning