Saving for college can seem impossible given everything else that needs your money, but you can do it. Follow these tips.

By Rory Evans
Illustration by Clare Mallison

Every two weeks, it feels like you’re being challenged to perform a magic trick: Take this paycheck (after taxes, natch) and then pay for your home, and groceries, and utilities (because heaven forbid your family white-knuckles through even a minute without Wi-Fi!), and new soccer cleats, and cat food, and repairing the dryer vent. And then—with the riches (ha!) that remain—be sure to stockpile money for your kids’ college tuition. Oh, but be sure to plow some money into your retirement account too!

Of course this feels impossible, but it can be done—and every little bit helps. (The Mob’s not above chasing after nickels and dimes, and look how rich they are!) Also, the earlier you start to do this, the better. Whenever you’re saving, “time is the greatest asset. The more time the money is in the account, the more savings will compound,” says Mark Kantrowitz, publisher and vice president of research for And no matter which basket you’re placing your eggs in, be sure to do so with after-tax money, says personal finance guru Suze Orman, of the Women and Money podcast. You want to sock it away in a 529 tax-deferred college savings account and a Roth IRA. That way, the money accumulates and you earn interest, plus it’s all yours when you take it out—with no need to pay taxes

on any of it for qualified withdrawals.

When you open your 529 account, if you think that you will still need to supplement the savings with financial aid, do not put the money in your kid’s name, Orman says. For instance, if you have $10,000 in an UTMA account in your kid’s name, it will reduce your financial aid by $2,000. But if the money is in your name, it will reduce aid by up to $564.

Also highly important: If your kid has a generous grandparent who wants to contribute to a 529, they should put the money into the account you manage. Otherwise, if Nana creates an account in her grandbaby’s name, “the full amount counts as untaxed income to the student,” Orman says. “Ten thousand from the grandparents could reduce your financial aid by five thousand.”

The money drawn from a 529 account can be used for all kinds of qualified postsecondary education expenses—

tuition, room and board, trade school—and when the account is in your name, you can use it for your own continuing education too. Practically speaking (if also a bit off the cuff), Orman says, “you don’t know when Johnny Angel is going to grow up to be Johnny Devil. You want flexibility, just in case, to have access to your money.”

Granted, as you’re saving in that 529, you want to be stashing money away in your 401(k), IRA, pension or other approved retirement account too. And you can do this without fear that you’ll get dinged for the money accumulated in that account when your kid applies for financial aid. That’s because your retirement plans as well as the house you live in are not counted as assets when you fill out the FAFSA. So go ahead and save with confidence, and do so with integrity. As Orman says, “It makes me want to strangle people when they ask, ‘How can I hide my money?’ If you have the money to pay for college, pay for it. Financial aid is really there for those who need it. Be honorable and teach your children to be honorable.”