Updated on February 27th, 2022

Most parents want to set money aside in their student’s college fund, but that doesn’t mean all of them can get started right away. Instead, many households have other financial priorities initially, causing parents to get a late start saving for college for their student.

Fortunately, even if your student is in high school, it’s still possible to sock some money away for their future college expenses. You simply want to make sure you’re using the best approach, giving you the most bang for your buck.

If you’re worried there isn’t enough time to set money aside for college or want to ensure your student has more than they need, scholarships could be the answer. If you and your student want to find out more about scholarships, sign up for our free college scholarship webinar! Take a quick trip over to http://thescholarshipsystem.com/freewebinar to reserve a spot today.

If you aren’t sure where to begin, here are eight tips for parents getting a late start saving for college.

8 Tips for Parents Getting a Late Start Saving for College

1. 529 Education Savings Plans

When you need to set money aside for your student’s college, a 529 Plan can make it easier, even if you’re a bit short on time. Along with being tax-advantaged accounts, they often offer returns above and beyond what you’ll find with a traditional savings account.

Every state has at least one 529 Plan option. One common approach is the education savings plan. With this, the money is set aside in an investment account. Functionally, they’re similar to 401(k) and IRAs in that regard, allowing the money to grow for a specific purpose.

You can choose between different investments, such as mutual funds, ETFs, and principal-backed bank products. With the alter, there are potentially some federal protections in the form of FDIC insurance, though that isn’t universally the case.

Cash set aside in an education savings plan can be used for tuition, fees, room, and board. Your student can also use the funds at most colleges and universities, giving them some flexibility.

2. 529 Prepaid Tuition Plans

Another type of 520 Plan, prepaid tuition plans, don’t involve investment accounts, which can make them a better choice for risk-averse savers. Instead, the money sent in purchases credits at participating colleges and universities in advance. Then, those credits are cashed in once your student starts attending school.

Prepaid tuition plans can pay for tuition and fees, but they aren’t usable for other costs, including room and board. There may also be residency requirements, and the number of colleges and universities that can accept payments this way is smaller than what you get with an education savings plan.

However, it lets parents set money aside for their student’s education based on today’s cost, not what colleges and universities are charging when their student starts taking classes. As a result, it can result in a significant financial gain, even if you get a late start.

3. Upromise Account

Upromise is technically a rewards program, allowing parents to set money aside for a student’s college by making everyday purchases at participating retailers. When a qualifying purchase occurs, it gives you money that you can deposit into a connected 529 plan.

The benefit of this option is that it’s used in conjunction with one of the approaches above. Plus, you don’t have to commit new money. Instead, you’re receiving funds that you can send to a qualifying account for shopping just as you always would.

Just make sure you don’t alter your spending habits in an attempt to get more cashback through Upromise. If you do, there’s a decent chance you might come out financially behind, which isn’t ideal.

4. Scholarships

When it comes to paying for college, scholarships are an excellent option, particularly if you’re short on time. There are awards that students can apply for during the school year before they’re heading to school. Plus, there are others that they can earn earlier in their high school career, or even when they’re in middle school or younger.

Scholarships can free up 529 plan money, making those savings efforts go further. Plus, your student may be able to use scholarships for expenses beyond tuition and fees, or even room and board, giving them funds for supplies, equipment, living costs, and more.

5. Use AP and CLEP

Encouraging your student to take AP courses in high school may not give you more money to set aside for their college education, but it can reduce how much they’ll need to spend to cover tuition and other costs. After completing an AP course, your student should have enough knowledge to take the AP exam. If they get a suitable score, they’ll earn college credit.

Another similar option is CLEP. With these, students can take tests to prove they have sufficient understanding of a subject and, if they score well, can earn college credit.

While there can be a fee for AP and CLEP exams, it’s far less than paying for the corresponding course. Plus, if your student earns enough credits, they may be able to shorten the amount of time they spend in college, allowing them to spend less on room, board, fees, and more.

6. Explore Community Colleges

Another option for reducing the cost of college is having your student do their first two years of schooling through a community college. Two-year institutions usually have lower tuition rates and fees than their four-year counterparts. Plus, if there’s one near your home, your student could stay with you while they’re tackling this part of your education. That eliminates the need to handle room and board, which could work in your favor.

If your student is open to going this route, make sure to confirm that any classes they take will transfer to their preferred four-year university once they’re ready to make the switch. That way, no one wastes any money accidentally.

7. Encourage Your Student to Get a Job

If your student is doing well academically and could reasonably work without sacrificing their educational standing, then this could be an option for collecting funds for college. Encourage them to find something part-time and to set part of their earnings aside in the 529 plan. That way, multiple household members are contributing, allowing the value of the account to grow faster.

8. Ask for Gift Contributions

Other people besides a parent and the student can add funds to a 529 plan in many cases. As a result, it could be wise to discuss that with family members, asking that they help support your student’s goal of going to college debt-free by contributing.

It’s important to note that there are potential tax implications relating to these gifts, especially if they’re large. There can also be restrictions put in place by the organization running the program.

When in doubt, any participating party should research federal and local tax laws – as well as guidance from the organization administering the account – to learn more about any nuances, limitations, or issues that may arise.

Bonus Tip: Rethink Using Your Retirement Account

Technically, parents can withdraw funds from many types of retirement accounts to fund their student’s college education. However, this isn’t always the smartest move.

When you pull out that money, there’s typically no replacing it. As a result, this can put you behind the curve when it comes to saving for retirement.

Even if you have the option of taking out a loan against your retirement account, you usually lose the earning power of that money until you pay back what you owe. While this is better than withdrawing it entirely, it could still put you financially behind. Plus, it means taking on a monetary burden, as it’ll come with repayment terms similar to other kinds of loans.

Instead, it’s better to set aside as much money as you can, using the options above to help you make more progress or reduce the cost of your student’s education. This is especially true if they may get a reasonable financial aid package.

Remember, your student may qualify for college grants and scholarships. Working while they’re in school could also be worth exploring. Additionally, while not ideal, student loans are an option on the table. So, instead of tapping your retirement account, look at all of the other options that could work. That way, everyone can come out in a better place financially.

8 Tips for Parents Getting a Late Start Saving for College