The Do's and Don'ts of Saving for College

iStock_75992309_LARGE.jpgThroughout May and June, college graduations around the world will take place sending millions of graduates onto the next chapters of their lives. Their graduation is likely the seal on a years-long journey to earn a college degree for not only the graduate, but also their parents, family members and those close to them. The benefits of a college education are endless, including continued learning, exposure to new ideas, cultural awareness and of course, the potential to earn more in life.

However, with the cost of college continually increasing, it has become necessary to plan ahead. Between 2006 – 2007 and 2016 – 2017, published in-state tuition and fees at four-year colleges increased at an average rate of 3.5% per year.1 Moreover, below is the cost of an average budget for undergraduates at 4 separate types of college institutions in 2016 – 2017. The most expensive option, a private non-profit four-year college with living accommodations on-campus, can cost students up to $50,000 for one year’s worth of tuition, room and board, books and supplies, transportation and other expenses:


Source: The College Board. “Trends in College Pricing.” Annual Survey of Colleges, 2016.

While costs are increasing, that doesn’t mean that you can’t develop a proper strategy to prepare for it. Whether you are saving for your child, grandchild or yourself, here are some do’s and don’ts of saving for college to keep in mind:

Do: Start saving as early as possible.

Ideally, you should start saving as soon as you can. Parents: prioritize paying off your own existing student loan debts and maximizing your retirement contributions first. Then, save, save, save! An early start can help you develop productive savings habits—and those early contributions, no matter how small, can add up over time.

Don’t: Think it’s too late to start.

If you haven’t started saving and the college-bound individual is just a few years off from their freshman year, don’t panic! You can still develop a strategy that fits within your family’s budget—you just need to take action and get started. Some options include increasing your savings contributions as much as possible, opening a 529 plan and much more. Discuss with your family and your financial professional to devise a customized strategy that works for you.

Do: Consider all options for funding education.

When developing your savings strategy, take all possible funding vehicles into consideration. Weigh the pros and cons of various savings options, such as 529 plans, Coverdell ESAs (Education Savings Accounts), UGMA/UTMA (Uniform Gift to Minors Act or Uniform Transfer to Minors Act) accounts, etc. against each other to decide which option aligns best with your strategy. Consider your state’s plans, the cost of each plan, investment options, and taxation, among other items. Along with identifying the proper savings option, you should also identify some goals—how much are you aiming to save? As a parent, how much are you willing to contribute towards your child’s education? Set goals or guidelines right from the start to ensure the strategy is as realistic and thorough as possible.

Don’t: Disregard financial aid or scholarships.

While you should not depend on the prospect of receiving financial aid or scholarships, you certainly should not rule either out completely. If savings or family resources won’t cover the 4-year cost of college, financial aid, loans or scholarships can be a great source of lessening the burden of the cost. Talk to family and friends about any scholarships they might know of and watch for any offered locally, through the school, or through community organizations.

Do: Consult with a financial professional.

Saving for college is a complex topic to navigate without professional counsel. A financial advisor can help educate you on complex topics such as applicable tax credits and deductions, using life insurance to mitigate risk, etc. For all of the above topics and much more, a financial advisor can help break down your options while still keeping your other financial goals in mind.

Don’t: Go it alone.

Along with seeking out the advice of a financial professional, consider seeking the help and advice of your family and friends. This could include grandparents, aunts and uncles, family friends and more. An investment as large as a college education can be a difficult thing to save for alone. Parents: in lieu of toys or other gifts for birthdays or holidays, consider a thoughtful way to ask several family members or friends instead for a contribution to your child’s college savings plan.

For more detailed information on these topics and others, visit www.finaid.org, www.savingforcollege.com, www.collegeboard.com or www.irs.gov.

To find a North Star financial advisor in your area, click here.

Written by North Star Resource Group.

1The College Board. “Trends in College Pricing.” Annual Survey of Colleges, 2016.

Financial Advisors do not provide specific tax or legal advice.  This information should not be considered as specific tax or legal advice. You should consult your tax or legal advisor regarding your own specific tax or legal situation.

North Star Consultants, Inc. - Insurance Products and Services. CRI Securities, LLC – Securities and Investments. Securian Financial Services, Inc. - Variable Products and Securities. North Star Resource Group offers securities and investment advisory services through CRI Securities, LLC and Securian Financial Services, Inc. CRI Securities, LLC is affiliated with Securian Financial Services, Inc. Members FINRA/SIPC. North Star Resource Group is not affiliated with Securian Financial Services, Inc. North Star Resource Group is independently owned and operated. North Star Resource Group| 2701 University Ave SE | Minneapolis, MN 55414. 1768644/DOFU 04-2017

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