The Best College Funds for Kids

Looking to Start Saving? Check Out These Great College Funds!

Saving for college is a daunting task. Which fund should I use? How much should I put into it? How often should I deposit? When should I start? These are all reasonable questions, so don’t panic. Today we’re going to be answering all your questions on college funds and you give you a few options for some of the best college funds for kids!

We’ll be looking into a few questions, including:

  • When to Start Saving
  • How Much to Deposit
  • How Regularly Should You Deposit
  • And The Best College Funds for Kids
When is the best time to start saving for college? Keep reading to find out!

When Should You Start Saving?

There’s no definitive answer for when you should start saving. It is never too late to start—but it’s never too early, either. The standard is usually once your child is born, but there’s no rules to say you can’t start before that. Every penny counts, and if you decide to start saving before your child is born, there's no harm in doing so. On the flip side, if you decide to start saving later, that’s okay too! You want to make sure you have a stable enough income to set some money aside. Providing for the future is great, but providing in the present is just as important. There is no wrong time to start saving, and by putting anything into a fund for your child, you’re doing the whole saving for college thing right! 

How much and how often should you deposit?

How Much Should You Put In?

This is another question that has a very loose answer. You should deposit as much as you’re comfortable with. Some people feel comfortable depositing $25 and others deposit up to $100. If you feel you can afford to put in more, then that’s great! Some even decide to take a set percentage out of each paycheck, which could be a great way to ensure you’re not taking too much out of your income! However, any amount that you choose to put into your kid’s college fund is money well spent. 

How Often Should You Deposit?

The most common way people tend to deposit is monthly. However, many also choose to take a percentage out of each paycheck to be automatically deposited. Or there’s always the option to put money in yearly as well. No matter when you decide to deposit, any money going toward your kid’s future is a great thing!

Time to find out what the best college fund is for your kids!

The Best College Funds for Kids

So, now that you know when, how much, and how often to deposit, we can start looking into where you should be depositing these funds. Today, we’ll be looking into four different options for college funds that each have their own perks. Without further ado, here are the best college funds for kids!

529 Plans

529 plans are probably the most textbook example when you start thinking of a college fund, but what are they and how do they work? A 529 plan is a tax-advantaged savings plan. This means that everything you put in grows free of tax and there is no tax for withdrawing an amount for a “qualified education expense.” With this type of plan, you can only contribute up to $16,000 per beneficiary each year. This number doubles for married couples. 529 plans can only have one beneficiary, meaning only one child per 529 account. However, there's no limit to the amount of plans you can open, so if you have multiple children, you can simply open more 529s.

Coverdell Education Savings Accounts (ESA)

Coverdell Education Savings Accounts are another great option for your kid’s college fund. ESAs are similar to 529 plans in terms of how they work. You don’t get taxed when withdrawing for qualified education expenses, but your child must be under the age of 18 to establish one. Unlike a 529 plan, you can only contribute a maximum $2,000 each year per beneficiary. Plus, if your modified adjusted gross income is over $110,000, you can’t contribute at all, so keep that in mind when choosing which college fund is best for you and your family. 

Roth IRAs

I know what you’re thinking: Isn’t this for retirement funds?! And you’d be correct—but no one said they were just for retirement funds! A Roth individual retirement account, or IRA, are contributed to on an after-tax basis, and contributions grow tax-free. You can only contribute a maximum of $6,000 per year to a Roth IRA, and there are some drawbacks. Typically, if you take money out before you’re 59 ½, you’ll have to pay taxes on the earnings portion of your withdrawal and a penalty of 10%. If the withdrawal is made for qualified education expenses, the penalty is waived, but you’ll still owe tax on the earnings. 

Custodial Accounts

Custodial accounts wrap up our list as another great option for saving for your child's education. A custodial account is a savings account that parents control for their kids until they reach eighteen (this age could be different depending on the state you live in). Unlike most accounts, custodial accounts don’t have any withdrawal penalties as long as the withdrawal is for the child. Plus, there is no annual contribution limit or income restrictions. However, the money that goes into the account is taxed and can get in the way of financial aid opportunities for your child. 

Those were some of the best college funds for kids!

Now you’ve got an amazing arsenal of funds to choose from so you can start planning for your child’s future. No matter what college fund you decide to use for your kids, you can rest assured that these funds will be a great choice!

Reviewed by
Joey Rahimi
Rileigh Wood
Rileigh Wood is a writer, music lover, and proud sourdough mother based in Pittsburgh, PA.
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