If you have children, one question may eventually become a major part of your financial plan: How are we going to pay for college?
College can be expensive, and tuition is only part of the bill. Housing, food, books, transportation, and other expenses can add thousands of dollars each year.
The good news is that you don’t have to wait until your child is ready for college to start preparing. Saving early and consistently can give your money more time to grow and help your family prepare for future education expenses.
How Much Does College Cost?
According to the College Board’s Trends in College Pricing 2025 report, average published tuition and fees for the 2025–2026 academic year are:
- $11,950 per year at public four-year colleges for in-state students
- $31,880 per year at public four-year colleges for out-of-state students
- $45,000 per year at private nonprofit four-year colleges
- $4,150 per year at public two-year colleges for in-district students
When housing, food, books, and other expenses are included, the average annual student budget reaches approximately $30,990 at an in-state public four-year college and $65,470 at a private nonprofit four-year college.
Source: College Board — Trends in College Pricing
These are national averages, but they demonstrate why planning ahead can make a difference.
Why Start Saving for College Early?
Time can be one of your greatest advantages when saving for your child’s future.
For example, suppose you invest $300 per month for 18 years and earn a hypothetical average annual return of 6%, compounded monthly. You would contribute $64,800, and the account could grow to approximately $116,000.
Waiting until your child is 10 would leave you only eight years to save, requiring much larger monthly contributions to reach a similar goal.
Investment returns are not guaranteed, but this example illustrates the potential benefit of starting early and saving consistently.
What Does Dave Ramsey Recommend?
Dave Ramsey recommends prioritizing retirement before saving for your children’s college education. In his Baby Steps plan, Baby Step 4 is investing 15% of household income toward retirement, followed by Baby Step 5, saving for children’s college.
His reasoning is straightforward: children have other ways to pay for college, including scholarships, grants, working while attending school, and choosing an affordable college. Retirement, however, is something you will eventually need to fund yourself.
The takeaway is to build a strong financial foundation first, then develop a college savings strategy that fits your family’s circumstances.
Source: Ramsey Solutions — Baby Step 5
What Is a 529 College Savings Plan?
A 529 college savings plan is a tax-advantaged account designed to help families save for education expenses. Earnings generally grow tax-free, and withdrawals for qualified expenses are generally tax-free.
Qualified expenses can include college tuition, fees, books, supplies, certain room and board costs, and eligible vocational or apprenticeship programs.
For Idaho families, IDeal is Idaho’s official 529 college savings program. Eligible Idaho taxpayers may deduct contributions from Idaho taxable income, up to $6,000 annually for single filers or heads of household and $12,000 for married couples filing jointly, subject to applicable rules.
The contribution generally must be made by December 31 to qualify for that tax year’s deduction.
Source: Idaho State Tax Commission — IDeal College Savings Program
What Is a Custodial Account?
A custodial account is another investment option families can consider when setting aside money for a child. These accounts are commonly established under the Uniform Transfers to Minors Act (UTMA).
Unlike a 529 plan, which is designed specifically for education savings, a custodial account can provide greater flexibility in how funds are used for the child’s benefit.
Here are a few important things to understand about custodial accounts:
- The child owns the money. The assets belong to the child, while an adult custodian manages the account.
- The money can be invested. Investments have the potential to grow over time, although returns are not guaranteed.
- Funds aren’t restricted to college expenses. Withdrawals must benefit the child and follow applicable legal requirements.
- The child eventually takes control. When the child reaches the applicable age under state law, control generally transfers to them.
- Taxes and financial aid should be considered. Custodial accounts have different tax and financial aid implications from 529 plans.
Custodial accounts may be worth considering for parents and grandparents who want to invest for a child’s future while understanding that the assets legally belong to the child.
We offer custodial accounts and can help families understand how they work and whether they fit into their broader financial goals.
How Much Should You Save for College?
There is no single savings target that works for every family. Your goal may depend on your child’s age, the type of school they may attend, your current savings, household income, and retirement plans.
You also don’t necessarily have to cover the entire cost yourself. Scholarships, grants, financial aid, student income, and family contributions may all play a role.
Start with what your family can realistically afford to save today, then revisit your strategy as your circumstances change.
Build a College Savings Plan That Fits Your Family
Preparing for college doesn’t have to be overwhelming. The right approach depends on your goals, the time you have to invest, and the type of account that best fits your needs.
Whether you’re exploring an Idaho 529 plan or a custodial account, understanding your options can help you make informed decisions about your child’s future.
We help families explore investment strategies and custodial accounts as part of their overall financial planning.
If you’re a parent in Idaho Falls or the surrounding area and want to discuss saving for your child’s future, we’d be happy to talk with you.
Schedule an appointment today to discuss your family’s financial goals.
Visit proinvestmentcoach.com to get started.
By Jimmy Hancock, an independent Investment Adviser in Idaho Falls, Idaho.
Sources
- College Board, Trends in College Pricing 2025 — college tuition, fees, and student budgets.
- Ramsey Solutions, Baby Step 5 — retirement and college savings priorities.
- Idaho State Tax Commission, IDeal College Savings Program — Idaho 529 plan and state tax benefits.
- Internal Revenue Service, Publication 550 — tax considerations for property transferred to children.
The investment example is hypothetical and does not represent actual investment performance. Returns are not guaranteed, and investing involves risk, including possible loss of principal.
This article is for informational and educational purposes only and is not investment, tax, or legal advice. Individual circumstances vary. Consult qualified professionals regarding your specific situation.
Preferred Retirement Options is a Registered Investment Adviser. Advisory services are offered only to clients or prospective clients where the firm and its representatives are properly licensed or exempt from licensure. For additional information, review the firm’s Form ADV at adviserinfo.sec.gov.