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How Waiting to Save for College Could Cost You in the End

Your child may only be a few years (or a few weeks) old, but waiting to save for college could come back to haunt you. Financial expert Chris Hogan shares his tips on saving for college—early.
Saving for College
Updated: December 1, 2022

Confession: My oldest daughter is 4 and my youngest is 6 months old, and I’m already stressing about how I’m going to pay their college tuition. They’re not even in Kindergarten yet, so why the anxiety?

Because when it comes to kids, time really does fly by. And before I know it, both girls will be packed up and headed off to the school of their dreams. On the off chance they don't get full rides (hey, I can dream, too), I'd better be ready.

More: How to Start Saving for College with CollegeBacker

To alleviate my financial concerns about college, I consulted with personal financial expert and best-selling author Chris Hogan of Ramsey Solutions. He outlined many ways American families can save for college—even if it’s 14 years away, as in my case. Read his advice below.

How soon do you need to start saving money for college?

Saving for College Financial Adviser

According to Hogan, you can start saving for your kids’ college when you’re at a solid place financially, meaning that you’re out of all debt (minus the house) and you’ve got an emergency fund of three to six months of expenses saved up.

“Whenever you decide to do this [save for college], make sure to talk to a financial adviser," he says. "You can open an account without their help, but their knowledge and experience are incredibly valuable.”

How soon should you open a bank account for your kid?

Opening a traditional checking account for your child isn't necessary, says Hogan. However, opening a savings account may be “a very good move.” Why? The savings account would allow you, your family members and friends to help your child learn the importance of saving.

One of the things Hogan did with his sons was this: When they received money for birthdays or Christmas, some of the money went into their savings account. For example, if they got $40 dollars for their birthday, $20 of the money went into savings.

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“All three of my boys have savings accounts, and they get very excited when their savings statement comes in the mail.”

Are there any new tax laws regarding college that families should know about?

The new tax bill keeps the deduction for student loan interest and other tax credits, such as the Lifetime Learning Credit and the American Opportunity Tax Credit, untouched.

“There are a few key changes that will affect families and students who are paying for higher education, but one in particular stands out,” explains Hogan. “Families can now use qualified education expenses in a tax-advantaged 529 savings account to pay for elementary or secondary school tuition.”

But, warns Hogan, college experts have cautioned parents against using this new flexibility with 529 accounts, worried that families who redirect those funds to cover private school education may use the money too quickly and not have enough for college. “Be aware! Read up on the new laws and see how they may impact you paying for college.”

If you’re already on a budget, how can you save money for college? Any tips?

Saving for College Budgeting

The key to saving is to understand your income and know your expenses. “Once you have knowledge on those two areas, then you can start to make adjustments and cutbacks as necessary,” says Hogan. “Two big areas that people tend to overspend on are groceries and eating out. So, I would advise people to set a clear spending amount for each of these two areas and only use cash. This will help you control your money and free up money to save for college."

There are other options for your kids to utilize to help pay for college, too, like scholarships, grants, getting a job while in school and state and community college.

Any other financial advice you can share with me?

Don't forget about your own retirement. You don’t want to become a burden to your child later on, so investing in retirement first could be the most loving thing you could do. Make sure you max out your retirement options like 401(k)s and IRAS first, then you can put money away in an Education Savings Account.

For more on alternative ways to pay for college, check out our Top 10 Tips for Paying for College.

Chris Hogan

Chris Hogan is a best-selling author and a personal finance expert. His book Retire Inspired: It’s Not an Age; It’s a Financial Number is a number one national best seller, and his Retire Inspired Podcast has millions of downloads. Chris is also a regular contributor to the EntreLeadership Podcast, a top podcast on business and leadership. Along with speaking at events across the country, Chris works with business leaders, professional athletes, and entertainers to help them set goals and navigate their financial futures.

Rachel Sokol

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