How Do You Plan To Bankroll Your Kid's College Education?


Just curious as to how you all financially-savvy people plan to bankroll college educations for your kids. Currently, we’re using a 529 investment plan which was started 7-years ago when my daughter was born - now I’m not so sure this is the best vehicle.

I know the most popular 529 alternatives are a Coverdell Savings Account and a Roth IRA, but now we’re kinda down a rabbit hole with our 529.

What do you guys think? I’d love to hear from other parents!



I’m planning on using a 529 plan specifically for my son’s education. What are your reservations with using a 529?

The Coverdell is another education-specific alternative, although the annual contribution limit is “only” $2k and there are certain income phase-outs.

The Roth IRA is intriguing as withdrawals for qualified education expenses are free of taxes and penalties. I guess my personal hesitation with this strategy is that there’s only so much Roth space available every year.

Yet another option I looked into was a UGMA/UTMA custodial account, but the tax advantages are a bit more limited.


I’m open to new ideas :slight_smile: We have 529s going. Other than that, pushing community college for a year or two, looking at outside US (can use 529s at several outside the US). Then there is hoping for scholarships and summer jobs. If they have to take out loans for undergrad, hoping to make a game plan w/ them for paying it off. Will also encourage our youngest to take AP classes or some college credit while in HS to save $. Our oldest is unlikely to take advanced classes…

If grad school is in the picture they are on their own. The child I see most likely going as far as grad school, I’m hoping it is in the sciences as easier to be paid to do grad school (that’s what I did, was a TA and received a stipend and the school paid for the classes and fees).


I have multiple 529’s (state & Vanguard), I Bonds, and some investments in Vanguard Target Date & STAR funds for my oldest that were a gift from my father in law. I made a college compact to outline what I’m committing to paying, what will happen with any “leftover” money, and what their responsibilities will be.

529’s are only as good or as bad as the investments within them. I like to have a multiple-pronged strategy to get to my total goal. Some in 529’s that can be easily transferred between kids (I have three) if needed; some savings bonds for stability (my oldest is 13 and approaching college age quickly), and some cash flow (I plan to have the mortgage paid off before my oldest goes to college).

Here’s the college compact article if you’re interested:


We have college like expenses for private school and are using rock star finance techniques to pay as we go…


My son is currently a high school senior and my daughter is a freshman. I already have money for next year and my daughters 1st sem. My wife and I are teachers, and have managed to save about $100k in mutural funds, but would like to leave it untouched for our retirement. That money was not in a retirement vehicle, so it did hurt us on our EFC when we did the FAFSA. My kids had about $15k in an UGMA from their grandmother, which also hurt us on the FAFSA. I have basically accepted the fact that I will not get need based money and I will not try to make adjustments to change my EFC. My plan is to stay one year ahead. I’ll need to save $2000 each month during the school year, and will help my kid with $19k toward college. They must do the rest. In Va, 4k$ per kid of contributions to a 529 is deductible on state taxes. I will move that money through a 529 for the deduction. My son’s $4k will be in the 529 less than a year. My daughter will have some money there a little longer. College is a focus of my blog JumpStartfromScratch. Please check it out for more details on my journey.


I just had my first child about 10 months ago. I’ve been on the fence about college savings.

I paid for most of my own college. I worked all through high school and saved up over $12,000. That paid for my first year. I received support from my dad via a $300/month stipend. He also promised to pay for my senior year in full, but due to a nasty divorce and financial aftermath he wasn’t able to (he paid for my sister’s freshmen year). We had a major falling out because I was relaying on the money to pay for school and ended up having to take a high interest loan to graduate. Eventually we made up and he paid me 10,000 in installments to help cover it.

I think it is good for kids to pay for a decent chunk of their college, and the expectation needs to be set early so they can plan for it like I did. I think I will cover 50% of the cost of my children’s college and they will be responsible for the rest. If they want to plan and save or take loans, that is up to them.

Currently I have about $6k in a taxable account that I have “set aside” for my children. I add 40 bucks each month. I’ll probably up this amount once I reach some of my other goals in a year or two. This is not just for college, but a “just in case” fund. If something terrible happens to them, I want the money to deal with it.

I think 529 plans carry too much risk if you are starting while your child is young. What if the pass away? What if they decide college isn’t right for them? What if they go for a year then drop out to be an entrepreneur? You lose all the benefits of that money and have to pay penalties to get it out. Radical Personal Finance had a podcast about 529 that really made me think about the different options.

I’ve never thought about using Roth savings for college. I will have to look into that.


My wife stated a 529 mere minutes after my son was born 13 years ago. He is expected to get all A’s, so he has high academic standards. He plays the oboe which is not the most popular instrument in his school band. He participates in Hockey, Lacrosse and Football year round too. So between athletics, academics and music something has to pan out scholarship wise! Otherwise we have the 529 and other means to fall back on. He can also take out a loan too. Who said parents have to pay for their kid’s education? My parents didn’t pay for any of my college. Neither did my wife’s parents…


@SomeRandomGuyOnline My main concern with the 529 is the fact that my child might not go to college. That certainly isn’t my plan, but at 7-years old she doesn’t have a plan yet. Other than that, it’s a great vehicle and I am glad I started it the moment she was born. Time will tell!


@SFF Yeah, we’re obviously moving forward with our 529 plan - we only have one child and we’re hoping she also wants to go to college when the time arrives. That’s my only hesitation. :slight_smile:


@ChiefMomOfficer Thanks for sharing your article! Our only real concern with the 529 plan is having a child that doesn’t want to go to college (hopefully this isn’t the case). We also only have one child - so there won’t be any sharing with siblings, unless we have a surprise in the next few years. haha!


Thanks for sharing so much info, @Mr.JumpStart! We have only one daughter and we’re fearful she might not want to go to college and we’ll be hit with big penalties. Certainly, this isn’t our plan but, unfortunately, we have no idea what her plan will be.


Congrats on the birth of your first child, @BrandNewPapa! I have always been concerned with our daughter not wanting to go to college - certainly that is not OUR plan, but it could be hers. Thanks so much for sharing your plan. And I do agree, I think paying for it yourself is a big benefit. I didn’t have a single penny of my higher ed paid for by someone else. As a result, I was laser-focused and did my best.


@Joe_5700 Ya know, I completely agree with you. No one paid a dime towards my education. And as a result, I likely did much better than I would have if I knew my parents were picking up the tab. Things that make you go, Hmm…


10+ years out from college, I had the same reservations about trapping money in a dedicated college only fund. You have no idea what your kids future will be. College may be different in 10 years.
I regret not taking advantage of the RothIRA benefits, but not 529’s.


+1 on the 529s. Roth IRAs are much more valuable in retirement than as college savings vehicles IMO.


Michigan offers MET plan where you buy semesters/years at current prices that your kids use when they are college aged. The plan is that tuition will increase at a faster rate than you could have made with the money, I did 3 years worth of this for each kid, the rest in 529’s

I was scared by my parents not helping me at all with education so I overcompensated with my own kids.


I have a 529 plan for both my boys…3 1/2 and 8 months so there’s a long way to go. I live in New York so there is a tax credit for contributing and the money grows tax free. We contribute a small amount every month. Both my wife and I went to a state school so that’s probably the most we’d look to help pay.

Not sure if need based financial aid will be available but if the money is in a custodial, it will have a bigger affect as any assets held in your child’s name counts more. As with the IRA, while those assets do not count when determining financial aid, if you withdraw from that account to pay for college, it will be counted as income for the following year (so best to use it for the final year if you go that route).

As to the worry about the child not going to college or leaving…I guess that’s a valid concern. I’m not putting a ton of money in there so if I’m forced to pay the penalty to withdraw, I’d be okay with it. Also, there’s always the option to transfer the account to yourself, to another family member…leave it there for your future grandchild! =)


If the beneficiary dies or gets a scholarship, money can be taken out penalty free (still need to pay taxes on earnings, though). There are a few other exceptions to having to pay the 10% penalty. And the penalty is only on earnings, not contributed amount as well.


It cannot be taken out penalty free unless it is given to another qualified beneficiary (i.e. another child).

I don’t see anywhere in IRS regulations that say just earnings are taxable. As far as I can tell, it depends on how the “qualified educational expenses” are paid. If the child receives a non-taxable scholarship, part of the distribution will likely be taxed regardless of whether or not earning or contributions are used.