Critical Tips to Help You Save for Your Child’s College Education

December 12, 2017 By Richard Poulson

College tuition today is more expensive than it ever has been – and it’s likely to get pricier in the coming years. For that reason, it’s essential to save as much as possible for your child’s college education.

Critical Tips to Help You Save for Your Childs College Education

For many people, that’s easier said than done. After all, saving a few dollars each month isn’t going to be enough – not if your child wants to go to a private college. Truthfully, even state schools are far pricier than they used to be.

The key is to start saving as early as you possibly can and to be smart about how and what you save. With that in mind, we’ve compiled some tips to help you make sure that when the time comes, the money is there to pay for your child’s college education & plan for life's future changes.

Start Saving as Early as Possible

This first tip might be an obvious one, but it’s essential. The earlier you start saving, the more money you’ll have on hand when your child heads off to school – and the less you’ll have to borrow.

One of the best ways to get an early start is to open a 529 college savings plan. These plans are exempt from federal income tax and, provided you use the money for tuition, school supplies, and other college-related expenses; they’re exempt from state taxes as well.

You can open a tax deductible 529 savings account as soon as you have a Social Security Number for your child. We recommend you do it early and put as much money into the account as you can afford. And keep in mind that you can ask relatives to make contributions on your child’s behalf, too!

Use Prepaid College Tuition Plans

What if your child is nearing college age and you don’t have as much saved as you’d like? Trying to save just a few years before your child is ready for college can be frustrating because most short-term investments only pay 1-2% interest per year.

One alternative is to put money into a prepaid college tuition plan. The key benefit of these plans is that they earn interest at the same rate that college tuition increases. That means that you can get more out of the money you put into the plan even if you’re late to the game.

Considering that tuition rates rise approximately 8% every year, these plans can be very attractive. However, it’s important to keep in mind that these plans are guaranteed on a state-by-state basis thus there is some risk involved in these plans.

Get Money for Shopping

You may be familiar with bank plans that deposit money into your savings account every time you purchase items with your debit card. Along the same lines, UPromise is a plan that deposits money into your child’s college fund when you make purchases at participating retailers.

They also offer an option that allows friends and family to add their credit and debit cards to your plan. It’s like crowdfunding except there’s no need for anybody to contribute cash out of hand. They can use their credit cards as they normally would and help your child at the same time.

Cut Back on Credits

This next tip isn’t for everybody, but if your child can handle a bit of extra work, then you may want to encourage them to take Advanced Placement, International Baccalaureate, or dual-enrollment courses while they’re still in high school.

While this plan won’t help you save money for college tuition, it will cut down on the amount of tuition you must pay. Students who get high scores on AP and IB tests can often skip prerequisite and introductory courses in college, and any college classes they take will earn them credits as well.

Of course, if your child has all they can handle to complete their high school courses, you can skip this option and try some others on our list.

Apply for Scholarships and Grants

As soon as you apply for financial aid using FAFSA, your child is eligible to apply for scholarships and grants. There are thousands of scholarships available, and qualifying for them may not be as difficult as you think.

One way to minimize the competition is to seek out scholarships that aren’t well known. Some of the big ones engender fierce competition, but the small ones are easier to win. To help with your research, try these three sites:

All three have searchable databases to help you find scholarships. By applying for as many as possible, you increase the chances that you’ll have outside assistance to defray tuition costs when the time comes.

Start at Community College

Four-year colleges get the most attention when it comes to saving for school, but community colleges are far more affordable and the credits your child earns there are just as valuable as those from a prestigious school.

One way to get the best of both worlds is to have your child start at a community college and live at home. They can knock out prerequisites and basic classes for a fraction of what they would cost at a private school.

In their second year, they can apply to transfer to the four-year schools of their choice. They’ll have two years (or less) of credits to earn to graduate, and that will significantly reduce their tuition expenses.

Research Colleges and Universities

Another way to save money on tuition is to make sure you consider all options before your child commits to a school.

This tip is especially good if your child knows what they want to do. Sometimes, the most prestigious schools aren’t the best choice. For example, you might think of Ivy Leagues as being the best schools in the country, but they’re not ideal for students who want to major in computer programming or game design.

Keep in mind that in-state tuition at state schools is far less expensive than out-of-state tuition. Some strategic planning can help you find a great school for your child that won’t require you to pay tuition you can’t afford.

Take the American Opportunity Credit

The American Opportunity Credit is a tax credit for qualified education expenses paid for the first four years of higher education.  The credit is 100% of the first $2,000 in qualifying expenses and 25% of the next $2,000 per student.  You may be eligible for a maximum annual credit of $2,500 per student, $1,000 of which is refundable.

To be eligible for the credit, the student must meet the following requirements: pursuing a degree, enrolled at least half-time for at least one academic period beginning in the tax year, not finished with their first four years of higher education, not claimed the AOTC for more than four years, and not have a felony drug conviction. 

To claim this credit, you’ll need Form 1098-T, which your student should receive from their school by January 31st of each year they’re enrolled. That will help you determine the amount of your credit, and you can then claim it on your 1040.  You cannot claim the credit if your MAGI is over $90,000 for individuals or $180,000 for families.

Take the Lifetime Learning Credit

If you or your dependents don’t qualify for the American Opportunity Credit, the Lifetime Learning Credit is another option.  The Lifetime Learning Credit, or LLC, is a tax credit that you may be eligible to take if you meet certain requirements. It entitles you to a tax credit of up to $2,000 per year which you can take for as many years as you qualify.  However, the LLC is a nonrefundable credit and can only reduce your tax liability to zero.

Like the AOTC, you will need to have a completed Form 1098-T from the education institute attended by you or your dependent.  This credit doesn’t apply to individuals who earn more than $65,000 or couples who earn more than $130,000. However, if your income falls within those parameters, you should calculate what you can get and make sure to take the credit each year that your child is enrolled in college.


Saving for your child’s college education is a big commitment, and it can be stressful for parents to figure out which savings plans, credits, and alternative financing options are best suited to their needs.

The tips on this list can help you save money for your child to attend the college of their choice. Remember, the earlier you start saving, the more options your child will have when the time comes.

Contact CMP if you’d like help mapping out a college savings plan for your child.

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