What is a good age to start saving? How much should you save for your child’s future? While you may have purchased a savings bond or started a small savings account early on, it’s always good to stay in the saving mindset. Even if you haven’t, it’s never too early (or too late). It’s important to keep your child in the loop, too!

Not sure where to start? We’ve gathered common ways families save for college and teach their children how to be smarter with their finances.

Start a savings account for your child

This is a great and inexpensive tool to help your child learn financial responsibility. From birth, you can open a savings account for your child. Many banks have a special youth savings account for children under 18 years of age—often with a $0 minimum balance and no monthly fees. Not only will your child earn interest, but he or she can learn the value of saving.

Have your child start saving for something he or she really wants, such as the latest gaming system. Birthday money, chore allowances, and summer jobs are all ways kids can add to their savings account. Once he or she has built up enough to purchase a special item, your child will see, first-hand, the benefit of saving. You can also create a deal with your child to match savings account contributions—encouraging further saving! Talk with your child about keeping this money for future goals during the teen years.

Open a certificate of deposit (CD) account

If you’d like to start saving for non-educational expenses but want a higher interest rate than a traditional savings account, consider a Family CD. Unlike savings accounts, CDs have a fixed term—a set period of time the money must stay invested to avoid early withdrawal penalties. So once you set this money aside, it’s best not to touch it until the CD matures. It has less risk associated with it than other investment options, too, as you know you’ll get the money you put in, plus some.

Choose a college savings plan

If you want your child to attend college, you have options when it comes to saving for education. Many college savings plans come with tax benefits, too. However, most have restrictions and penalties that limit how money is spent.

529 Plans

Anyone can set aside money for college in a 529 plan. The plan purchaser controls the funds and can specify a beneficiary—the current or future student. As a parent, you may have more peace-of-mind knowing how the money you’ve saved up will be spent. You can also change the beneficiary to another family member without penalty if your child doesn’t go to college.

529 savings plans are like a 401K or IRA. However, you must choose from limited high-risk and low-risk investment options, according to BankRate.com. Students can use this plan to pay for tuition, books, boarding costs, and computer technology at an accredited college or university.

Coverdell Education Savings Account (ESA)

A Coverdell ESA is a tax advantaged trust or custodial account used for elementary, secondary school, and college expenses. Like an IRA, you can invest in different options, such as stocks, bonds, mutual funds, and certificates of deposit, according to BankRate.com.

Earnings and withdrawals are free from federal income tax if used for eligible education expenses. However, funds must be used by the time the student reaches age 30. Leftover funds will be distributed within 30 days and subject to income tax and a 10% penalty tax. Funds can also be rolled over into another family member’s Coverdell ESA account to avoid this. If your son or daughter has special needs, age limit and contribution caps are more flexible.


While IRAs are intended to help families save for retirement, they are also a college funding option. If you make a withdrawal from an IRA—like any IRA—you'll owe income tax regardless of age. If you're under the age of 59 ½ and use the funds for qualified education expenses, you will not be charged the early withdrawal penalty. You can use this money for yourself, spouse, or child, according to the IRS.

This is only a brief overview of ways families save for college. To learn more about the college savings options discussed above, visit Federal Student Aid, an Office of the U.S. Department of Education.

It’s always best to talk with a financial advisor and/or tax professional who can guide you through the best options for your unique situation. If you haven’t started a savings account or thought about saving for your child’s future, now is the time.

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