A 10-Year College Savings Countdown: What to Do, What to Avoid

young girl holding a clear glass jar of money with a label showing the word "college"

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Raising a child isn't cheap, and for many parents, college is the largest cost to plan for. According to College Board, the average cost of in-state tuition and fees at a public, four-year university was $10,560 for the 2020-21 academic year. Students attending private universities can expect to incur an even higher cost of attendance. 

While student loans can be used to cover college expenses, they're not an ideal solution. Education loans can make it more difficult for students to save or plan for their other financial goals after graduation. Taking on student loans as a parent could also make planning for your own retirement more of a challenge.

Developing a plan to save and prepare for college sooner, rather than later, can help you avoid a financial pinch. If you have a decade or more until your child heads off to school, here are the most important things to do (and not do) to get ready financially. 

Year One: Assess Your College Savings Goals

When planning for college savings, the first question you need to ask yourself is: How much money will they need to go to school? The answer can vary greatly, depending on whether they plan to go to a two- or four-year university, go to school out of state or stay closer to home, or attend a private vs. public university. 

Something else you have to consider: inflation and rising tuition prices. Colleges and universities routinely raise prices, so if your child has a decade to go until they begin their freshman year, you'll need to factor in the possibility of paying more.

Once you have a goal in sight, compare that number to the amount you already have saved. Then, break down the amount you'd need to save annually to reach your goal. Break that down further into a monthly college savings target. 

Years One through Five: Save Aggressively

If you've set your savings target, the next step is to decide where to put that money. You could save for college in a regular savings account, but that won't give your money much opportunity to grow. It also won't yield any tax benefits.

A 529 college savings plan, on the other hand, allows for tax-free growth and tax-free withdrawals for qualified education expenses. All 50 states offer at least one 529 plan and you can contribute to any plan, regardless of which state you live in. Depending on the plan you choose, the total lifetime contribution you can make may reach $500,000.


With a 529 plan, you have the opportunity to invest your money in mutual funds, target-date funds, exchange-traded funds, and other securities. Investing in these options involves more risk than stashing money in a savings account but you have the potential for much higher returns. 

In the first five years of your 10-year college savings countdown, it's to your advantage to save as much as possible to capitalize on the power of compound interest. The more you can sock away during the early years, the longer that money has to grow.

Remember that you'll need to observe the annual gift tax exclusion limits on contributions. For 2022 the gift tax applies to financial gifts of more than $16,000 (up from $15,000 in 2021). In other words, in 2022, if you're married, you and your spouse can jointly contribute up to $32,000 per year, per child, to a 529 college savings plan (or up to $30,000 in 2021). Alternately, you can make up to five years' worth of contributions at once without a gift tax penalty. If you do that in the first year of the countdown, however, you won't be able to make any new contributions until five years have passed.

Years Six to 10: Continue to Save and Review Your Allocation

Saving for college is similar to saving for retirement. When you're younger, you can afford to be more aggressive in your investment choices, since you likely have plenty of time to recover in the case of a market downturn. 

With college savings, you may feel comfortable investing more aggressively when your child is younger but the timeline is compressed. Once they reach middle and high school, it's a good idea to revisit your investments to ensure that you're not taking on too much risk.


If the market were to experience a sudden downward shift in a year or two before your child plans to start college, that could significantly shrink the amount of savings you have available to help pay for it. 

Something else to consider during the high-school years is how what you're saving may affect your child's ability to get financial aid if it becomes necessary. Parental assets, including money held in a 529 plan, are included in federal student aid calculations. Individual colleges and universities may also take them into account when determining eligibility for school-sponsored aid programs.

Years One through 10: Best Savings Practices and What to Avoid

There are some things that you should be doing throughout the 10-year ramp-up to college. As you create your plan, remember these do's and don'ts:

Do Automate Your Savings

Putting college savings contributions on auto-pilot can take the hassle out of remembering to save.

Do Get Grandparents or Other Family Members Involved

Grandparents, aunts, and uncles can also make contributions to a 529 plan on your child's behalf.

Do Check Your Investment Fees

High investment fees can eat away at your account earnings so it's important to review those regularly. 

Don't Wait to Save

Delays can shrink your total college savings nest egg and increase the risk of coming up short.

Don't Put Your Retirement on the Back Burner

While saving for college is important, it shouldn't come at the expense of your own retirement savings. Remember that you can take out loans to pay for college but not for your retirement years. 

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. College Board. "Trends in College Pricing and Student Aid," Page 3.

  2. U.S. Securities and Exchange Commission. "An Introduction to 529 Plans."

  3. Michigan.gov. "MI ABLE 529(A)."

  4. Internal Revenue Service. "Instructions for Form 709 (2021)."

  5. Internal Revenue Service. "Frequently Asked Questions on Gift Taxes."

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