To save money for your child’s future education, you should aim to save at least 50% of the estimated costs, open a 529 plan, take advantage of compound interest, and set up automated savings.

Giving your child the opportunity to further their education and pursue the career of their dreams is a gift that could make a major impact on their future for years to come. Leaders Credit Union is happy to guide you as you make choices that will help your children thrive, not only with finances but with their education and career.

Key Takeaways

• Try to save for 50% of the expected costs of your child’s college or trade school.
• Open a 529 investment account to save for your child’s education.
• Utilize compound interest to help make your savings grow.
• Make your savings automated to ensure you stay on track towards your goal.

How Much Does College/Trade School Cost?

 As you begin to plan for your child’s education, you may wonder—how much will it all cost? You might have personal experiences with student loan debt and high tuition costs from your own education or someone else in your family. However, costs tend to get more expensive as time goes on, so let’s look at the numbers of the average costs for secondary school: 

College: 4-Year Undergraduate Average Tuition

In-State Public: $11,610 per year | $46,440 total

Out-of-State Public: $30,780 per year | $123,120 total

Private: $58,628 per year | $234,512 total

Trade School Certificate

Two-Year Program: $15,070 per year | $30,140 total

Paying for college or a trade school program is no easy feat without proper planning and time dedicated to saving money. The good news? You’re already thinking ahead, so you have time to begin saving money now, whether your child is a toddler or in high school.

 

How Much Should I Save Now for My Child's Future Education?

 

While you may not know which career path or school your child is interested in attending, you can still help them excel now by saving up for some of the costs. It’s recommended to save at least 50% of estimated education expenses. This percentage can look different for each household, but it’s a good place to start.

Based on the average cost of education, this 50% could look like:

In-State Public: $23,220

Out-of-State Public: $61,560

Private: $117,256

Trade School: $15,070

Your savings goal could be based on these numbers or somewhat different. The idea is that these average costs give you an idea of what you can be aiming for if you plan to save 50% of expected education costs. Whether your child is 8 or 16, it’s ideal to begin setting aside money every year, so you can slowly build towards your chosen goal.

Let’s Practice: Your child is 5 years old, and you’re ready to begin saving for their college. Since you’re not sure where they’ll want to go, you decide to aim for the out-of-state public cost. Here’s how to calculate your savings by their age and half of the expected public out-of-state college cost:

Estimated age your child will start school – current age of your child =___

50% cost of school divided by years till child graduates = ___

The final amount is how much you should aim to save per year. If you prefer to set a monthly savings goal, divide the number further by 12 to see how much you should set aside each month.

What is the Best Way to Save for My Child's Education?

Now that you have an idea of how much you want to save, it’s time to decide where you want to keep your money and how it might grow.

1. Open a 529 Investment Account

A 529 investment account allows you to save for your child’s education intentionally. While you can allocate funds from a 529 for K-12 grade, using a 529 for college or trade school often provides the biggest long-term benefits. The catch? 529 funds must be spent on qualified education expenses and those rules vary state to state. It's worthwhile to check out your state’s list of qualifying expenses.

An important thing to keep in mind is that there is a $10,000 limit that you can withdraw each year. In 2026, this number increases to $20,000.

Important to Know: Unlike traditional savings accounts, 529 plans don't earn a fixed interest rate. Instead, they are an investment account, so your contributions are typically invested in mutual funds or similar portfolios. Over time the earnings you make (from interest, dividends, and capital gains) are reinvested, so you begin earning returns on returns. A 529 plan can grow through the power of compounding.

2. Compound Interest

Taking advantage of compounding interest is another way to prepare financially for your child’s future. Compound interest means earning not only on the money you originally put in (the principal) but also on the interest that money has already earned. This strategy can be extremely useful for accelerating your savings and reaching your goal faster. Some accounts where you can apply compound interest are:

• High Yield Savings Accounts (HYSAs)
• Certificates of Deposit (CDs)
• Money Market

Pro Tip: Familiarize yourself with which accounts are tax-advantaged. Having an account like a 529 plan offers tax-free growth, meaning less dollars you’ll lose towards taxes and more for your child’s education! 

A way to ensure that you’re able to stay on top of your monthly savings is to have automatic contributions. These contributions can help you better manage your money over the years and ensure you are steadfast in your goal.

FAQs about How to Save for Your Child's Future Education

Q: How much should I save for my child's college or trade school education?

A:  Have a goal to save at least 50% of the estimated expenses of your child’s future education. This cost can vary depending on where they go to school, but saving now means you can help protect them from financial struggles later. 

Q: What is a 529 Plan and how does it work?

A: A 529 plan is an investment account that has tax-free benefits and is designed exclusively for education costs like tuition, living expenses, and textbooks. 

Q: Is it too late to begin saving if my child is older?

A: It’s never too late to be proactive in saving for your child’s education! Even if your child is in high school, you still can save intentionally and make contributions that will help them in the long run. 

Q: How can I calculate how much to save for my child's education monthly?

A: Use this simple formula:

1. Estimate the number of years until your child starts school.
2. Divide 50% of the projected cost by that number of years.
3. For monthly savings, divide the result by 12.
   
   

Prepare for the Future with Leaders Credit Union

Trying to navigate finances for your family and your children’s future can be a challenge, but you don’t have to make all these decisions on your own. Whether you’re wanting to set up automated savings or build your investment portfolio, Leaders Credit Union is here to help! Stop by one of our branches or talk with a Financial Champion to begin your financial journey with us.

Wanting to improve your family’s finances? Read our blog, “How to Financially Prepare for Growing Your Family.”

Deepen your understanding of how to manage your budget with our free smart budgeting toolkit.

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