Saving for college is something that nearly everyone who has a child understands and it can oftentimes be a burden for many families. With the costs of college tuition rising each year, it’s important for parents to start a college fund as soon as they have a child if not before. This is to ensure that their offspring have a chance to go to college if they so desire, because finding the funds in advance is a lot easier than attempting to find the funds on the spot. How much to save is a matter of looking at projected costs of college in the future.

Projected Costs of College

Even though estimates vary, experts estimate that the costs of a college education in the year 2030 will be $44,047. In some instances, the total cost for a four-year degree will be more than $205,000. The cost of a private college in eighteen years is estimated to come in at a whopping $130,428. And that's for just one year! The cost of a community college, although significantly less expensive, will rise five percent per year and may be a determining factor when the offspring will be entering college. Consequently, it would benefit parents of newborn babies to start a college fund now. Parents need to look at the following plans and make a determination about which one will be their primary educational savings vehicle.

Tips to Save for College

There are several good ways to save for college. We want to make sure that you have all the tools you need to start a college fund that is going to be right for your family, and is also going to allow your child to be successful in the future. 

Roth IRA

There are several methods by which someone can be saving for college. One of the ways to do this is to demarcate a certain section of a Roth IRA for college. Money withdrawn from IRAs, including Roth's, are actually exempt from penalties if the money is used for educational expenses. The Roth is unique because it allows investors to use their money for college as well as for retirement. This is one of the fantastic items to take advantage of when saving for your child’s college education.

Coverdell ESA

The Coverdell ESA plan isn’t one of the most used ways to save for college, but it can be a great plan as well. It may be the most overlooked vehicles for financing a college education because it has been overshadowed by the more well-known 529 plan. One factor in favor of the Coverdell ESA is that it covers tax benefits that the 529 plan does not. It offers convenience, flexibility, and tax free savings that is unique to its own plan.

529 Plan

The 529 ESA plan is probably the most well-known way to save for college and you should spend time comparing the benefits and the drawbacks of this plan. Most states have a 529, so it is important to research what each state offers, so you can be sure to get the best deals out of your 529 plan. Just because the 529 plan is more well-known than other college funds, does not make it the best plan. Sometimes your child may receive less financial aid if you use this to finance their education. This is not always the case, but make sure you know what will happen if you choose this plan to save for college. 

Talk with a Financial Advisor

Go over you plans with a financial advisor or representative when saving for college. These people spend every day looking at these savings options and will be able to help you make the best decision when choosing college funds. They will also likely tell you not to rely on traditional methods like low interest savings bonds when it comes to saving for college. It might be one of the methods of least return when it comes to these costs, and better options are out there. Take the time to meet with the a financial advisor, and you will definitely see the benefits. 

Apply for Scholarships

Okay, this one technically doesn't fall on the parents, but it is still an important part of saving and paying for college. In 2015, Rocky Mountain Credit Union’s President & CEO Ed Stofko decided to offer a college scholarship to members to help support their pursuit of higher education and keep some well-qualified employees in Montana. Members who are currently enrolled in or will be attending a Montana college or university in the Fall are eligible to apply for the “Membership Makes You Feel Good” Scholarship. There are tons of scholarships out there for students and it is really easy money. Encourage your student to help out with paying for their education and apply for all the scholarships that they can find. 

MESA Accounts

Did you know Montana credit unions offer a Matched Education Savings Account (MESA) for college students?  RMCU offers the account for members to save money for college and the MESA Program matches that savings; usually at a much higher rate of return.  A MESA account is for students with lower incomes and is designed to help families and individuals of modest means establish a pattern of regular savings. MESA programs are dedicated to helping participants save for post‐secondary education. 

So what does a MESA participant have to do to get the matched savings?  MESA participants agree to: make minimum monthly savings deposits of $25 for at least six months, participate in personal finance/money management training and post-secondary planning, and maintain regular contact with RMCU program representatives.

How do you know if you are eligible to participate in a MESA program? The individual or family must meet the following four qualifications:

• Have an annual household income at or below 200% of the Federal Poverty level or income at or below the Earned Income Tax Credit threshold. (The federal poverty guidelines are calculated by the number of people in your household and your annual income. These income levels are listed in the tables below.) AND
• Do not have household net worth exceeding $10,000. (In determining net worth, the primary dwelling and one motor vehicle owned by a member of the household will be excluded.) AND
• The applicant must have earned income AND
• The applicant must be a Montana resident enrolled at one of the participating schools. For the Montana GEAR UP program, an applicant must be enrolled at a Montana GEAR UP High School.

Researching several of the ways to save for college should be helpful for those considering financing a college education. It is something that most parents of young children need to consider, and when the time comes when they go to college, you’ll be glad you saved! Download our free budget worksheet to start budgeting for your child's college savings.