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Get an early start on saving for college

September is College Savings Month, as declared by Congress and more than 40 states, some of which are giving away extra scholarship money this month to raise awareness of the need to start saving for school. It might seem a little late, since financial aid has already been awarded and loans taken out for this fall, but the importance of college savings carries on throughout the school year.

And you should start saving much earlier than the start of the school year if you want to build up enough cash so that you, your children, or your grandchildren aren’t stuck paying off loans for decades.

Funding a 529 (a tax-sheltered education account) is the bedrock of college savings. According to calculations by Mark Kantrowitz, the publisher of Edvisors, a website providing student loan advice and education resources, about one-third of your college savings should come from a 529, one-third from student loans, and one-third from current cash and income. But, based on his calculations of where tuition rates are going, a child born today would need to put $250 a month into a 529 for a public university, and $500 for a private one, just to reach that goal of saving one-third of college costs.

That might seem insurmountable, but you can set up automatic deposit to a 529 with as little as $25 monthly, to at least get started. If you get an inheritance, windfall, or raise, sock away a little extra.  

And 529s can be opened and funded anytime during a child’s life or during the year to begin saving and taking advantage of their tax breaks. Don’t delay either on applying for scholarships. Most students wait until they’re accepted to school to start focusing on them, but about half of scholarship deadlines land in the fall, and half in the spring, according to Kantrowitz.

For instance, Upromise, which gives you cash-back towards college costs, when you shop at certain retailers, is giving out ten $10,000 scholarships. That contest, called Make the Pledge, Keep the Promise, closes November 6. Also, the AARP and TIAA-CREF’s “Big Dreams Contest” launched on September 5, will put $100,000 into one child’s 529 . It closes on December 31.  

To find out what your state is doing for College Savings Month, The College Savings Plan Network, which is a nonprofit college information organization, has a handy map letting you click on your home state. The organization is also running a College Savings Month Facebook Giveaway to win $529 toward college:

For more on how to boost college savings before and during college see our guides on How to handle a college student’s money needs and Budgeting and saving for parents.

—Chris Fichera

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