If you’re thinking about saving for your child’s college education or other future education needs, one misstep to avoid is not saving at all. If you're already putting money aside, you are moving in the right direction towards your saving goal. If not, it's never too late to get started, and you'll be glad you took that first step.

Paying for a child’s future education is often a balancing act between long-term savings and financial aid (which includes scholarships and student loans). Here are five considerations to prioritize when saving for college or other types of future education — and how to set your goal in action. 

Start saving for your child's college as soon as possible and commit to saving consistently over the years. By starting savings when your kids are young, time is on your side. You’ll have extra time to save what you are able to, and smooth out the impact of the market, which is subject to risk. Saving early also helps you feel more prepared for unexpected future events that might impact your savings strategy.

Thanks to the power of compound interest, the earlier you invest, the greater the potential for positive compounding impact. In a hypothetical example, if you contribute just $25 a month to a 529 education savings account with a 5% annual rate of return over 18 years, you will contribute a total of $5,400. When compounded every year at the same rate of return, the account could grow in the invested time period to $8,730. That extra $3,330 is the benefit of compounded growth.* 

While a standard savings account is suitable for certain, often short term, financial goals, a 529 plan is a great savings option when it comes to saving for your child’s college and future education. The IRS created 529 plans as an investment vehicle designed to help families pay for future education expenses that also offer unique tax benefits. 

One of the main advantages is that 529 savings plan earnings and qualified withdrawals are not subject to taxes when used for qualified expenses. Many states offer additional state tax benefits, including New Mexico, where contributions to a state-sponsored 529 plan also can be deducted from state taxable income.

Some parents assume financial aid will cover the lion's share of the cost of their child's college education, whether based on financial need or their child's academic, athletic, or other extracurricular talents and achievements. However, this is seldom the case. 

In 2024, the annual survey "How America Pays for College" found that for a typical family with a college student, scholarships and grants covered just 27% of college costs in 2023-2024, down from 29% in 2022-2023. 

Financial aid is a fantastic benefit, but it often falls short of covering most college expenses.  An important consideration when putting a savings plan together.

Steady saving over many years can have a powerful impact when families are saving for college. However, how far the savings will stretch will depend on the desired university or college. Costs can vary substantially by type and location of the institution. It's important to "get real" about how much your family can contribute to college or other educational expenses, and discuss what fits best for your future student. This discussion should also involve whether the student is planning on working while attending college. 

While many college students depend on student loans to fund their higher education, it's wise to understand the reality of student loan repayment before deciding to rely on this option. About 43.6 million Americans have student loan debt from federal and privately sourced loans, with the average college student borrowing $29,400 to pay for their degrees. On average, borrowers take two decades to pay off their loans. According to the Federal Student Aid office, the current interest rate for undergraduate student loans is 6.53%. Under that interest rate, a 20-year student loan of $29,000 would accumulate over $23,000 in interest.

Student loans can be a great option, and sometimes they are the only option for a student’s pursuit of higher education. When considering student loans, also consider the earning potential of the career your child/future student plans to pursue after graduation. One good rule of thumb: Your overall loans shouldn't exceed the salary you expect to earn the year after graduation.

As you start the college savings journey for your children, grandchildren, or other family members, remember to consider not only the needs of your child but also those of your family as a whole. 

Investigate all your college savings and funding options, including federal aid, grants, and scholarships—and start saving early with a tax-advantaged 529 savings account. You can open an account with The Education PlanⓇ today in about 15 minutes.

*This example is for illustrative purposes only and does not represent the performance of any specific account or investment and does not reflect plan costs or sales charges that may apply. If such costs or sales charges had been taken into account, returns would have been lower. Systematic investing does not assure a profit or protect against loss in declining markets. Before investing, investors should evaluate their long-term financial ability to participate in such a plan.