It may or may not surprise you to learn that student loan debt in the U.S. totals $1.78 trillion. Roughly 43.5 million Americans owe money on student loans, and that number could continue to climb.

In fact, between 2006 and 2023, student loan debt grew by $1.3 trillion. That’s an increase of roughly 270%. 

If you don’t want your children to wind up saddled with student loan debt, it’s imperative that you take steps to try to save for their college education. Here are some moves worth making.

Image source: Getty Images.

1. Start early

College savings may not be the first thing on your mind when you’re deep in the throes of diaper changes and toddler tantrums. But the reality is that the sooner you begin saving for your kids to go to college, the more money you stand to accumulate. So as ridiculous as it might seem to be socking funds away at a time when your child can’t even say their own name, it’s in your best interest to do so.

Let’s imagine you’re able to start saving $300 a month for college when your child is a year old. If you invest your money at an 8% average annual return, which is a bit below the stock market’s average, you’ll end up with about $121,500 in savings.

Meanwhile, for the 2022-2023 academic year, the average cost of annual tuition and fees was $39,723 at private colleges, says U.S. News & World Report. That means that a $121,500 college fund could suffice in covering roughly 76% of that total.

2. Don’t just stick to a savings account

You may be inclined to keep your college savings in the bank. But if you go that route, don’t expect the average annual 8% return we saw in the example.

These days, some high-yield savings accounts are paying annual interest in the ballpark of 4%. We don’t know how long that will last. But even if today’s interest rates hold steady for many years, saving $300 a month at a 4% return over 17 years will only give you about $85,000 for college. That means your college fund might only suffice in covering about 53% of the cost of private tuition and fees for four years.

Now, you have options when it comes to investing money for college. You could stick with a taxable brokerage account, but both a 529 plan and a Roth IRA will allow your college savings to grow in a tax-free manner. And to be clear, you can absolutely take Roth IRA withdrawals penalty-free to pay for college costs.

It’s unfortunate that student loan debt has continued to skyrocket. But you should also know that your children aren’t doomed to graduate college owing lots of money. If you make an effort to start socking money away for college when they’re young and invest in stocks rather than play it safe with a regular savings account, you might be able to help your kids keep their loan balances to a minimum — or potentially avoid debt completely.

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