Saving for College: Age 0-5
Learn the benefits of starting to save early and strategies for maximizing your contributions.

The Benefits of Early College Savings
While college may feel far off when your child is still in diapers, starting to save now can make a significant difference in the long run. Given the increasing cost of tuition, starting a college savings plan for children aged 0 to 5 sets a solid foundation for their future education. Early contributions not only provide financial security but also highlight the importance of long-term investment.
One major benefit of starting early is the ability to spread contributions over a longer period, making saving for college age 0-5 more manageable. This approach reduces financial pressure as your child nears college age and helps build a substantial fund without needing large, last-minute contributions.
Another benefit of early savings is the power of compound interest. By investing in a college savings account, you earn interest on your initial contributions and then on the accumulated interest over time. This compounding effect can substantially increase the total saved by the time your child is ready for college. The earlier you start, the more time your money has to grow, potentially leading to a sizable fund for education expenses.
When should I start saving?
Short answer: It’s never too early to start investing in your child’s education. This chart outlines a clear roadmap to help you maximize your savings and ensure you’re set up for success:
Life Stage | Age of Child | Savings Goal | Recommended Actions |
Pre-Pregnancy | N/A | Establish a savings mindset |
|
Pregnancy | 0-1 years |
Begin initial savings |
|
Infancy | 1-5 years | Build a foundation |
|
3 Effective College-Savings Tools
529 Plans
529 plans are state-sponsored investment programs specifically designed for educational savings, offering two distinct options: prepaid tuition plans and education savings plans. Prepaid tuition plans enable you to purchase units or credits at participating colleges and universities for future tuition at today's prices, which can be a strategic way to manage future educational costs. On the other hand, education savings plans allow you to open an investment account to save for a variety of future college expenses, including tuition, mandatory fees and room and board.
Benefits:
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- Tax Efficiency: Gains accumulate tax-free and withdrawals are tax-free for eligible educational expenses.
- State Incentives: Many states offer income tax deductions or credits for contributions.
- Flexibility: Accounts can be transferred between relatives.
- Accelerated Gifting: Contributors can make a substantial initial deposit by combining five years' worth of the annual gift tax exclusion.
UGMA/UTMA Accounts
UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts are custodial accounts that allow assets to be held in a minor’s name without the need for an attorney to establish a trust. These accounts are used to gift or transfer assets to minors and the funds can be used for any purpose to benefit the minor, not just educational expenses.
Benefits:
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- Flexibility: Funds can be used for any purpose to benefit the minor.
- Control: Once the minor reaches the age of majority (18 or 21, depending on the state), they gain control of the account.
Considerations:
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- Financial Aid Impact: Assets in these accounts are considered the minor's property, potentially affecting financial aid eligibility.
Coverdell Education Savings Accounts
Coverdell Education Savings Accounts (ESAs) are tax-advantaged investment accounts designed to cover educational expenses from kindergarten through college. These accounts offer flexibility in funding various educational needs.
Benefits:
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- Broad Coverage: Covers expenses from kindergarten through college, including tuition, fees, books, supplies and technology.
- Tax-Free Growth: Contributions grow tax-free and distributions are tax-free for qualified expenses.
Limitations:
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- Contribution Limits: $2,000 per year per beneficiary.
- Age Restrictions: Contributions can only be made until the beneficiary turns 18 and funds must be used by age 30.
- Income Limits: Higher-income earners may be restricted from contributing.
Strategies for Maximizing Your College Savings
Saving for college can feel overwhelming, especially for families with young children aged 0-5. However, effective strategies can help maximize savings and ensure funds are available for higher education.
One effective method to boost savings is automating contributions. Set up a direct deposit from your paycheck into a college savings account, ensuring consistent saving without needing to think about it.
Involve family and friends in your college savings journey. Share your goals and invite contributions to your child's education fund during occasions like birthdays and holidays. Creating a savings fund that others can contribute to not only grows savings but also engages your support network in your child’s future education. Consider age-based portfolios to maximize growth potential over time.
College Savings for Every Stage
Whether your child is in preschool or high school, we’ll help you plan with confidence. Find the right savings plan for your child based on their age and your financial goals.
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