Saving for your child’s future education

The 18-year clock starts ticking the moment your child is born.

A college degree, despite the rising cost of tuition, remains a major achievement in the modern economy. You are more likely to have a job and earn a decent salary the more education you receive.

Yet many aren’t preparing. Just 56 percent of parents are actively saving for their child’s education, according to Sallie Mae, and hold an average of only $18,135. That wouldn’t cover one year of tuition, fees, and room and board at an in-state public institution, according to College Board.

The outrageous price tag for higher education, coupled with a lack of parental savings and the economic benefit of actually going to college, has led to historic levels of student loans. Many graduates leave school with a yoke tied around their neck, pushing back their ability to buy a house and start a family.

Following are several types of accounts people use to save for their children’s college, and what to know about each.

Savings account

Many parents prefer to save for their child’s education with some kind of transaction account, such as a savings account or CD. According to Sallie Mae, college-saving parents have nearly $6,500 parked in these accounts, more than in a 529 plan, which represents 36 percent of all saved.

You need to be careful with these safe products.

“There is an asset protection allowance, or APA, that protects a portion of the parents’ assets, based on the age of the older parent,” when determining financial aid, says Mark Kantrowitz, publisher and vice president of research at and an expert in student loans and financial aid.

Students’ income and savings, though, have a bigger, more negative, impact on the availability of financial aid than parental assets and income.

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