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How to Save for Children’s College: A Guide for Moms

Updated: May 26, 2023

As a mom of a little one, you’re probably thinking about everything you need to provide for your child as they grow up—food, clothes, a place to live, the best schools, and so much more. But have you started to think about saving for your child’s college education?




It might seem like it’s too early to start planning for something years away, but trust me—the sooner you start, the better. Thanks to compound interest, time is one of your greatest assets, so take advantage of it!

How much will it cost? What's the best way to save? As these questions come to mind, you may feel overwhelmed. But don't worry; I've got your back! Below, I'll share some ways you can start planning for your child's college education in the baby years and beyond.


What Are My College Savings Options?


There are multiple ways you can save for college. Let's look at some options available to you as you look to save for your child's education:

  1. Individual 529 Plan

  2. Coverdell Education Savings Account (ESA)

  3. Uniform Gift to Minors Act (UGMA)

  4. Uniform Transfer to Minors Act (UTMA)

1. Individual 529 Plan Accounts

One excellent way to start saving for your child's education is through an individual 529 plan. A 529 plan is a tax-advantaged savings plan designed to help families save for college. When you contribute to a 529 plan, your money grows-tax free! In addition, you won't pay taxes on the earnings if you use the money for qualified education expenses.


Each individual state sponsors 529 plan accounts, so rules can vary from state to state. Interestingly, you don't have to use your state's 529 plan. That's great news because it allows you to shop around and see if 529 plans from other states offer better investment options and lower fees. As you shop around, also pay attention to the different rules for each state.


Who Can Contribute to a 529 Plan?

One of the great things about a 529 plan is that anyone can contribute to it. Friends, relatives, you name it. Everyone can share in contributing to your child's education. Once you receive a Social Security number for your child, you can set up the account, and anyone can start contributing!


How Much Can I Contribute to a 529 Plan?

There are no yearly contribution limits to a 529 plan; however, each state sets a maximum aggregate limit. This limit generally falls between $235,000 and $550,000. Even though there isn’t a yearly contribution limit, you could trigger a gift tax if you contribute more than $17,000 (2023 limit) to a 529 plan per year.


What Are the Restrictions on a 529 Plan?

A 529 plan requires that the money be spent on qualified educational expenses. The expenses could include:

  • College tuition

  • Room and board (including off-campus housing)

  • Vocational and trade school

  • K-12 Private School Tuition

  • Student loans

  • Books and supplies

  • Computers and computer software

  • Internet

Although there are some restrictions with a 529 plan, there is also a lot of flexibility. For example, with a 529 plan, you can transfer it to another child without any tax consequences. There is also no age limit (in most states) regarding when your child needs to use the money.


So if Harper decides to return to school when she is 35, she can still use the funds from the 529 plan. In addition, your savings in a 529 account will have a minimal impact on financial aid eligibility.


2. Coverdell Education Savings Account (ESA)

A Coverdell ESA is very similar to a 529 plan, but there are a few significant differences to be aware of:

  • The maximum you can contribute is $2,000 per child per year.

  • There are income restrictions. You can only contribute to an ESA if you make less than $110,000 (single) or $220,000 (married).

  • Your child must use the money by age 30.

Unlike 529 plans run by each state, with an ESA, you can choose almost any type of investment, including stocks, bonds, and mutual funds.


3. Uniform Gift to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA)

Another option for saving for your child's college education is through a UGMA or UTMA account. Parents or guardians set up these accounts as custodians for their child. The custodian manages the account until the minor reaches a specific age (usually 18 or 21). At that point, the assets are transferred to the minor.

These accounts allow you to transfer assets such as cash, stocks, and bonds to the custodian for the benefit of a minor. The funds can be used for anything that benefits the child, not just educational expenses.


The main difference between UGMA and UTMA accounts is the types of assets that can be held in the account. For example, UGMA accounts can only hold financial products such as cash, securities, and insurance policies. In contrast, UTMA accounts can hold those same assets plus real estate, artwork, and other types of property.

Some important information to consider with UGMA and UTMA accounts:

  • The assets are considered the minor's property. Therefore, when your child comes of age, they gain control of the account and can use it for anything they want.

  • Any income earned on the account is subject to federal income tax and, in some cases, state income tax.

  • Since the account is in your child's name, it can affect their eligibility for financial aid when they apply for college.

  • These accounts offer flexibility regarding what assets you can transfer, and there are no contribution limits.

4. What’s My Best Option to Save for My Child’s College Education?

So which option is best for you? It depends on your individual situation. A 529 plan is an excellent option if you want to specifically save for education expenses and take advantage of the tax benefits.

On the other hand, UGMA and UTMA accounts are a good choice if you want more flexibility regarding what assets you can transfer and are okay with the potential drawbacks.


Regardless of which option you choose, it's essential to start saving for your child's education as early as possible. Contributing even a small amount each month will add up over time and make a big difference when it's time for your child to head off to college. By starting early and being consistent, you can help ensure that your child has the opportunity to pursue their dreams without being weighed down by excessive debt.


Let AncHER Help You Discover the Best Ways to Save for Your Children’s College Education

I know you want the best for your little one's educational future. So do we! At AncHER, we want to help you feel empowered to take confident action and make sound decisions about your child’s future education expenses.


Don’t miss out on any of our tips and strategies on how to save for your kids’ college education! Follow me on Instagram or sign up for my newsletter so you’re always in the know.






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