The Ideal Time to Start a College Savings Account


As a gig worker who can experience large fluctuations of income each month, saving for your children’s future college expenses might seem like an unrealistic goal. The earlier you start, however, the more interest the money will earn and the more funds your children will have available for college.

According to an October 2019 report from Morningstar, the average age of a child when parents start a college savings account is seven years old. The publication considers this a late start. The beneficiary loses the benefit of seven years of compounded interest had the parents started a college savings account at birth. Here are common college savings options, as well as what to do if you’re afraid you have started saving too late.

The 529 College Savings Plan

The Internal Revenue Service (IRS) allows anyone to designate a beneficiary for a college savings account and contribute to it on a tax-free basis. That means the IRS deducts any amount you paid towards a 529 College Savings Plan from your taxable income. Each state sets its own rules with 529 plans such as contribution limits and how to withdraw from the account. You’re under no obligation to open this type of plan compared to other types of savings accounts. But, the tax benefits it offers make the 529 College Savings Plan an ideal choice.

Consider Prepaid Tuition

Savings accounts and certificates of deposit often offer low interest rates. Parents who started saving later than they would have liked might want to take advantage of a prepaid tuition plan. This option also makes a good alternative to investing in the stock market if you’re a bit gun-shy about potentially losing money.

You don’t have to know where your child will go to college to start a prepaid tuition plan. These are special types of savings accounts for educational purposes with interest rates that match the rate of inflation for college tuition. For example, college tuition rose an average of 3.4 percent in 2020. Certificate of deposit and CD accounts typically pay less than half that of that. Putting the money into a prepaid tuition account makes sense when you only have a few years to save.


With Upromise, you receive rewards for shopping at participating retailers who then deposit the money into a college savings account for your child. Friends and family can also register for a Upromise account to help the savings add up faster. Students already in college can benefit from the deal when they shop with retailers registered with the program as well.

You can never start too early when it comes to college savings for your child. You can still make progress when you start late. If you’re the one attending college, remember that you can name yourself as beneficiary of a 529 College Savings Plan.

About the Author: Lisa Kroulik has worked as a freelance content marketing writer for 10 years. She loves the work and the lifestyle it affords. Learn more about Lisa’s work and availability through Writer Access.

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