How to Save for College: 7 Best Strategies

1. 529 Education Savings Plans

A 529 plan is a tax-advantaged investment account designed to help families save for college, private school or other qualifying educational programs. Typically, a parent or family member opens a 529 for a child (the beneficiary of the account). What makes 529 plans attractive is the potential for tax savings: Contributions grow tax deferred, and you can make qualifying withdrawals tax free. Some states offer additional tax credits or deductions for 529 contributions.

Qualifying 529 expenses include:

• Tuition and fees for college, grad school, credentialing programs and apprenticeships
• Room and board
• Books, materials and supplies
• Computers, software and internet access
• Testing fees
• Educational therapy for special needs students
• K-12 tuition, fees and expenses (up to $20,000 per year)
• Student loan repayment for the beneficiary or their sibling (up to $10,000 per lifetime)

Meanwhile, you can't use a 529 to pay for transportation, personal electronics, optional activities and insurance.

There aren't annual federal limits on 529 contributions, but states set lifetime limits. Typically, these limits are generous—up to $500,000 or more.

Money in a 529 plan is typically invested in a portfolio aligned with the beneficiary's age. For example, a plan for a young child may have a more aggressive portfolio optimized for growth, while an older child's portfolio will likely be more conservative.

Tip: There are two types of 529 plans: education savings plans and prepaid tuition plans. The former allows for more flexibility in how and where you use the funds and is recommended if you don't know where your child will go to school.

2. UGMA and UTMA Accounts

Uniform Gifts to Minors (UGMA) and Uniform Transfers to Minors (UTMA) accounts are custodial accounts for children or grandchildren that allow the transfer of cash, investments and other assets. The adult custodian handles these accounts until the child reaches the age of majority—typically 18 to 25, depending on the state. But because UGMAs and UTMAs belong to your child, they can have a bigger effect on their financial aid eligibility compared to a parent-owned 529.

You can save or invest the contributions to a UGMA or UTMA, but you won't receive the same tax savings offered by a 529 plan. Additionally, earnings above $1,350 will be taxed at the minor's tax rate, and earnings above $2,700 will be taxed at the parent's tax rate.

Unlike 529s, UTMAs and UGMAs have no contribution limits, and your child can use the funds for anything—which may or may not appeal to you. Transfers into these accounts are irrevocable, meaning once they're done, they can't be undone.

3. Coverdell Education Savings Accounts

A Coverdell education savings account (ESA) is a tax-advantaged trust or custodial account you can use to save for your child's education. You, a family member or another adult can open an ESA for a child under 18 or someone who has special needs. Like a 529 plan, you can invest the funds in an ESA, and contributions and disbursements aren't taxed if used for qualifying expenses. Unlike a 529 plan, contributions don't qualify for tax credits or deductions.

One of the biggest drawbacks of an ESA is its lower contribution limits—up to $2,000 per year total, regardless of how many people contribute. Additionally, if your modified gross adjusted income (MAGI) exceeds $95,000 ($190,000 if married and filing jointly), your contribution limit will be lower. And if your MAGI is more than $110,000 ($220,000 if married filing jointly), you can't make any contributions to a Coverdell ESA.

On the other hand, Coverdell ESAs offer more flexibility in eligible expenses compared to a 529 plan, especially when it comes to K-12 education. K-12 uniforms, transportation, tutoring and after-school care all qualify.

Tip: You can only contribute to a Coverdell ESA until the beneficiary turns 18, and the funds must be used within 30 days after they turn 30. These rules don't apply to beneficiaries with special needs.

Learn more: How to Finance Your Child's Private School Education

4. High-Yield Savings Accounts

Don't overlook a simple high-yield savings account (HYSA) when it comes to saving for college, especially if you only have a few years to save. HYSAs have no contribution limits or restricted uses—though they don't offer tax savings, either.

A HYSA works like a regular savings account, but your balance earns a higher interest rate. As of June 2026, the best HYSAs were earning up to 4% APY, while traditional savings accounts might earn 0.01%.

While you'll likely earn more by investing your cash over the long term, HYSAs are insured and highly liquid. If you don't have enough time to invest for your child's college education, a high-yield savings account may be a good alternative.

High-yield savings accounts are easy to set up, and many offer online banking. Plus, you can open a HYSA in your name only or open a joint account with your child.

If the account is strictly in your name, you maintain control of the account but can transfer money to your child as needed.

5. Roth IRAs

A Roth IRA is a tax-advantaged account designed to help you save for retirement—but it can also help pay for your kids' college.

Money goes into a Roth IRA post-tax, where it grows tax-free. Withdrawals are also tax-free after age 59 ½. However, if you haven't reached that age, you can still take out money for qualifying expenses penalty-free, but you'll pay income tax on the earnings. Higher education expenses fall into this category.

If you're under age 50, you can contribute $7,500 to your Roth IRA in 2026. Those 50 and over can contribute an additional $1,100. However, if you make over $168,000 ($252,000 for married couples filing jointly), you're ineligible to make Roth contributions, regardless of your age.

Read more: How to Open an IRA

6. Brokerage Accounts

A brokerage account is a taxable account in which you can buy stocks, bonds, funds and other investments. You can use the funds in a brokerage account however you want—for retirement, major purchases or your child's education. But unlike Roth IRAs, 529s and other accounts, brokerage accounts don't offer tax advantages.

The benefit of a brokerage account, in addition to its versatility, is that there are no contribution or withdrawal limits. You can contribute however much you want, when you want, and you can take money out at any time.

7. Gifts From Family and Friends

If your child is fortunate to have family and friends who want to and are able to support their future, you might encourage contributions to their college savings instead of traditional birthday and holiday gifts.

There are a variety of ways friends and family can contribute to college costs. Monetary gifts are an obvious method, though any gifts of more than $19,000 per year require the donor to file a gift tax return.

Note: You only have to pay gift taxes if you make more than $15 million in gifts over your lifetime. Anything over the $19,000 annual threshold reduces this exemption amount.

Friends and relatives can give cash or contribute directly to your child's 529 plan, Coverdell ESA, UTMA, UGMA or any other account dedicated to college savings. Just keep in mind each account type's contribution limits and how the assets might affect your child's financial aid eligibility.

Contributing to savings and investment accounts isn't the only way for family members to help your child save on college costs. If they can't give money, they may be able to help by assisting with move-in, furnishing a dorm room or sharing meals if they live near campus.

Tip: Payments made directly to a financial institution aren't considered gifts, no matter the size of the payment. So if you have someone who wants to make a significant gift without filing a gift tax return, they can consider making a direct tuition payment.

Learn more: Smart Ways to Gift Money to Children

Frequently Asked Questions

The Bottom Line

There are plenty of ways to start saving for your kids' college education. Regardless of the option you choose, the best thing you can do is to start saving now. The earlier you save, the more time you'll have for your money to compound. If you can't save the full amount, don't stress. Saving even a fraction of the cost of college goes a long way in reducing your child's reliance on loans.

For help wading through the implications of college savings, taxes and your own financial future, don't hesitate to reach out to a financial advisor.