When having a baby you must assess and adjust your finances

According to a recent survey by T. Rowe Price, nearly three-quarters of kids believe they will definitely or probably go to college. This means that now is the time to create a plan and start saving, if you aren’t already. Stick with these dos and don’ts, and soon you will be well on your way to your college savings goal.


Cartoon with check mark

  • set a goal
  • know how much you need to save
  • use the right tool for the job
  • keep saving without fear of impacting financial aid

Cartoon with x mark

  • rely on debt
  • count on scholarships and grants
  • forget to do your research
  • forgo applying to school because of a high sticker price

Stuart Ritter‘s recommendation to ExpertBeacon readers: Do

Do set a goal

Instead of letting the total cost of college intimidate you, start by creating a personal goal and working toward it each month. Maybe it's saving for one or two years of college. Maybe it's a specific dollar amount you want to reach. Either way, saving for any part of your child’s college expenses will help in the long run.

Do know how much you need to save

Once you have set your goal, it’s important to map out what you need to do to accomplish it. For instance, if your goal is to pay all the expenses for one year at a public college, you would likely need to save about $100 per month from your child’s birth. To save for all four years, you might need to save a little over $400 per month[1]. By creating a road map for yourself, you can make saving for college more attainable.

Do use the right tool for the job

You may think that it doesn’t matter if you save for college in a savings account, retirement account, or a 529 plan. Indeed, more parents identified a savings account (44%) as the best way to save for college than a 529 plan (33%). But 529 provide federal tax benefits and flexibility for college savings that aren’t available with any other kind of account. And contributions to a 529 plan may have state tax benefits as well.

Do keep saving without fear of impacting financial aid

It’s possible you know other parents who don’t save in advance for college because they’re afraid they won’t receive financial aid if they do. This is likely based on a misconception. The federal financial aid calculation focuses primarily on income rather than savings. The formula only considers up to 5.6 percent of savings as being ‘available’ to pay for college expenses (and doesn’t include retirement accounts or home equity at all). But up to 47 percent of income could be considered eligible! So unless you’re prepared to potentially redirect up to 47 percent of your income to college expenses when your child goes to school, it’s wise to save ahead of time to handle the expense.

Stuart Ritter‘s professional advice to ExpertBeacon readers: Don't

Do not rely on debt

Saving something – even if you think the amount is going to be small – is better than saving nothing. That’s because borrowing money versus saving in a tax-advantaged plan can potentially double your total college costs. Every dollar saved ahead of time can equate to almost $2 that you won’t have to pay in debt later [2].

Do not count on scholarships and grants

More than half of parents expect scholarships will pay for some or all of their child's education. While being awarded a scholarship is a great achievement, on average, scholarships and grants cover only 10 percent of the average public school cost and one-third the average private school cost for households earning $65,000-$106,000 in 2012. So make sure you’re prepared to cover any remaining costs.

Do not forget to do your research

A common myth is that saving for college in a 529 plan will limit your options, but that’s not true. Money from a 529 plan can be used at any accredited college, university, or vocational school in the country – and even at some overseas schools. Additionally, when savings are used toward qualified education expenses, you don't have to pay taxes on any earnings in your 529 plan. Depending on where you live, your state may offer additional tax benefits, so be sure to explore the plan options and pick the one that's best for you and your student.

Do not forgo applying to school because of a high sticker price

You shouldn’t automatically assume a school is off limits based solely on its sticker price. If your child is interested in a school, he or she should apply in order to find out the net cost, which is the cost to you once all free money (scholarships and grants) are applied. After factoring this in, the overall cost could become much more attainable.


Although saving for college can seem daunting, if you follow these simple dos and don’ts, you can set and reach your college saving goals. You don’t have to save everything, but anything you can save now is less that you’ll have to pay later.

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