Raising a child is no small task. Though it’s no surprise that parenting requires a substantial investment of time and energy, the financial cost of raising a child might raise more than a few eyebrows. According to the SmartAssetTM 2024 Study, the median annual cost to raise a child in the United States in 2024 is $22,850, and that figure is considerably higher in many states.

Commitment and discipline are vital to getting across the financial finish line when raising a child, and that includes finding a way to finance a college education. Data from the College Board, a nonprofit that studies trends in the cost of a college education, indicates the cost of tuition and fees varies widely depending on the type of institution. Tuition and fees at an in-state four-year public school cost a little more than $11,000 during the 2023-24 school year, while it was nearly four times as much ($41,540) at a private nonprofit four-year institution.

Financing a child’s college education can seem like a daunting task. However, an array of strategies can help parents save more for college.

Take advantage of a 529 plan. A 529 education savings plan is an increasingly popular way to save for college. The Education Savings Programs at Bank of America reports that 529 plan assets increased from $88.5 billion in 2008 to more than $446 billion in 2023. A 529 plan is a tax-advantaged investment program administered by a state. When funds withdrawn from the plan are used for qualified expenses, such as tuition costs, then the earnings are free from federal income tax obligations. There are distinctions between 529 prepaid tuition programs and 529 savings programs, so parents are urged to discuss those differences with a financial advisor so they can choose the best plan for their situation.

Redirect extra income to a college savings plan. Parents may have “extra” sources of income that can be used to fund college savings. Annual bonuses, money distributed through state-sponsored property tax relief programs and even money freed up when kids graduate from daycare and into elementary school can be redirected into college savings plans. Redirected daycare expenses may be particularly savvy, as parents know the cost of daycare is considerable. In fact, a recent report from Child Care Aware of America indicated the cost to place two children in child care exceeded annual typical mortgage payments in 45 states. Once kids are out of daycare, parents can redirect some or all the money they had been spending on child care into college savings plans.

Don’t go it alone. A 2023 survey from the College Savings Foundation found that 45 percent of parents would request that family and friends contribute to a child’s 529 plan in lieu of the standard gifts given to children for their birthday, special events like graduation or during the holiday season. This practical yet less traditional approach can pad college savings plans by a considerable amount over the years, and close relatives might be more than happy to help parents fund a better education for their youngsters.
College is a costly investment, but parents can look to a handful of strategies to help defray tuition costs. MM24C470