Whether you�re looking ahead to college or just want to set your kids up with a financial cushion, you have options when it comes to your money. Here are six of the best ways to save money for your...

File this under �Things You Already Know� � kids are expensive. What you might not know is the best ways to save money for kids, and we�ve got your back on that.

The cost of raising a child from birth through age 18 is roughly $233,610, according to the United States Department of Agriculture (USDA). To break that down further, that�s around $13K per year, per kid.

Oh. And this figure doesn�t even factor into university costs.

On average, tuition and fees ran $41,411 at private colleges and $11,171 for in-state residents at public colleges for the 2020-2021 school year. The estimated cost of a four-year degree, 18 years out?

$375,167.67.

(Have you picked your jaw up off the floor yet? Good. Keep reading.)

Again, that�s just the estimated cost. And there are grants and college scholarships available to help families chip away at the fees.

Still, these numbers can be downright scary. Thankfully you have several solid options when it comes to saving money for your children and their future education plans.

Planning for Your Kids� College Savings and Future Expenses

First things first: If you have nothing saved for retirement, focus on your own needs before you start saving for someone else. You�re on a more fixed timeline. Plus, you can�t borrow for retirement savings like your child can for their education.

First, assess your total financial picture. Take inventory of your outstanding debt, and create a budget if you haven�t already.

It�s great if you�re able and want to contribute to your children�s future expenses and education fund � student loan debt has surpassed a whopping $1.7 trillion in the U.S. � but you need to be smart about it. If you put yourself in a precarious financial situation, it can be more difficult for you to course-correct later.

Now on to the good news: You have many options to start saving for your child�s future today, no matter your budget.

5 Ways to Save Money For Your Kids� College Education

Here are several ways you can invest and save money for your children, whether you want to open a college savings plan or start a rainy-day fund.

1. 529 College Savings Plans

If you think higher education is in your child�s future, consider a 529 college savings plan.

A 529 plan, or qualified tuition plan, is a tax-advantaged investment account. This means the money grows tax free and you can also take it out tax free. Each state (plus the District of Columbia) offers at least one plan. You can view minimum and maximum contribution limits and other considerations by state here.

There are two types of 529 plans: prepaid tuition plans and education savings plans.

Prepaid Tuition Plan

With this plan, a saver or account holder can purchase units or credits at a participating university and lock in current prices for future tuition costs for the beneficiary. Typically, this money can�t be used for elementary and high school costs, nor be put toward room and board at college.

Most prepaid tuition plans have residency requirements for the saver and/or beneficiary, and are sponsored by the state government (and not guaranteed by the federal government). However, not all state governments guarantee the money paid into them, so it is possible to lose money. Additionally, your mileage may vary with this plan if the beneficiary doesn�t attend a participating college, resulting in a smaller return on investment.

Education Savings Plan

With this plan, a saver opens an investment account for the beneficiary�s qualified college education expenses, including room and board. This money can be applied toward universities (and some outside the U.S.), and withdrawals can also be used to pay up to $10K at elementary and high schools.

These plans are sponsored by state governments as well, but there are fewer residency requirements. Investments in mutual funds and ETFs are not guaranteed by the federal government, but some bank products are protected.

As with all investments, there are fees and risks associated with 529 plans.

Anyone can use a 529 college savings plan (no annual income restrictions!) and you can change the 529 beneficiary to another family member without incurring a tax penalty.

2. Roth IRA

A Roth IRA is an individual retirement account. You fund it with money you�ve already paid taxes on. So, when the time comes (typically at age 59 �), you can withdraw your Roth IRA contributions and earnings tax free. However, you can withdraw this money earlier, penalty-free, to pay for higher education costs for your child.

You can also open a Roth IRA in your child�s name.

A parent or guardian will need to serve as the custodian, since minors generally can�t open brokerage accounts. Children need to have an earned income (part-time jobs, like babysitting, count) to contribute to it. Like adults up to and under age 50, they can only contribute up to $6K to the Roth IRA annually. Once the child turns 18 or 21 years old (depending on the state in which they live), control of the account must be transferred to them.

With a Roth IRA, they�ll get tax-free money when they retire. They can also use these funds to help pay for their own qualified college expenses. While your child will have to pay taxes on the earnings, they won�t face an early withdrawal penalty.

3. UGMA and UTMA Accounts

If you want to invest in your kid�s future without choosing an account that�s for education expenses only, look into a Uniform Gift to Minors Act or UTMA Uniform Transfers to Minors Act.

Uniform Gift to Minors Act (UGMA)

This account establishes a way for someone under 18 years old to own securities without requiring a trustee or prepared trust documents.

Uniform Transfers to Minors Act (UTMA)

This account is similar to a UGMA. However, minors can also own property such as real estate and fine art.

A custodian will also need to be set up for this type of account. Parents can set up a custodial account and then make withdrawals to cover child-related expenses. Once the child is of legal age, the assets are transferred to their name. Since the funds for both UGMA and UTMA accounts are in the child�s name, they cannot be transferred to another beneficiary.

4. Brokerage Account

Looking for more options that aren�t exclusive to education? You can invest in a taxable brokerage account.

A brokerage account allows you to invest money in stocks, bonds and mutual funds. Once you deposit your money, you can work with a financial advisor or robo-advisor, or both, to invest and grow your money.

You generally have more flexibility with brokerage accounts: You can choose from a variety of investments and make withdrawals at any time. Note: If your child does plan on going to college, the value of this account will be included in financial aid calculations.

5. Savings Account

Don�t forget the old standby: a traditional savings account.

While interest rates are low and whatever interest you earn is taxed as income, an FDIC-insured bank savings account is a tried and true (and safe) place to store money ��whether yours or your kid�s.

What�s the best type of savings account for a child? We�re glad you asked!

There are also plenty of child-friendly bank accounts you can choose from to encourage your children to start saving early and often. A savings account is a good start.

If you�re in the 18+ year old camp, you can open a high-yield savings account to save money toward your children�s expenses. You can earn higher interest rates with these accounts, though you�ll need to be diligent about your money moves to qualify for the rates.

Additional Ways to Save Money for College

Sticking with college, here are additional ways to save that you and your child can work toward. Whether you�re a new parent or a year out from sending your kid off to college, consider these opportunities to save money.

Ask for gifts toward their education expenses. If friends and family would like to give a gift to your child, ask them to consider putting any money toward their college fund. You can do this for any birthday or holiday, though the earlier you start investing in their education, the better. (Bonus: Your 1 year old doesn�t have the capacity to ask for the latest toy and won�t object to this gift.) Encourage your kid to work and save. Once your child is of legal working age, they can get a job and start saving money for their school expenses. Even saving a small amount per paycheck can help them make a dent in later costs; you might also consider �matching� their savings to incentivize them (for example, give them $1 for every $20 they put away for college). Look to companies and professional organizations. Your workplace may offer opportunities to children of employees looking to earn money for college. Some large companies, like UPS, offer such scholarships. Review your company handbook or ask your HR department about any available opportunities. Professional organizations, like the Rotary Club, are also known to offer scholarships and grants for continuing education. If you belong to any organizations or other clubs, look out for these benefits. Apply for scholarships and grants. Additionally, encourage your high school student to look for scholarships and grants to help mitigate their college costs. Universities typically offer money for students who fit certain criteria � such as transfer students or people in certain majors � and meet other requirements. There are all sorts of weird scholarships, contests and even apps that can help them earn money for school, too. Just make sure they weigh the pros and cons of any entry fees and stay on top of contest deadlines.

And, mom and dad, when the time comes, make sure you fill out the Free Application for Student Aid (FAFSA).

Frequently Asked Questions (FAQs)�

Here are three questions we see pop up time and again when it comes to investing in your child�s future.

When Is the Best Time to Invest Money for College?

College is an investment, and it can be a pricey one. By saving early (and with the magic of compound interest on your side), you can earn a bigger return on your money down the line.

With that said, don�t let getting started �later� deter you from saving at all. It�s kind of like the Chinese proverb, �The best time to plant a tree was 20 years ago. The second best time is now.� You want to save what you can as early and regularly as possible. But if life circumstances prevented you from doing so before, right now is the next best time to start saving.

What�s the Best Way to Invest Money for a Child?

The good thing about putting away money for your children is that there is no one �right� way to do it. You can open a 529 plan for your child early on or later as they get closer to college aid. Or, you can fund a brokerage account so you�re not held to stricter rules about how the money�s spent.

Of course, you can invest your money in a few different ways ��some combination of a 529 plan; Roth IRA; or, UGMA, UTMA, brokerage or savings accounts � so you have options.

Consider meeting with a financial expert to help you craft a plan that�s best for you.

How Much Money Should I Save for My Child?

How much money you �should� save depends on a few factors. For one, there are a lot of variables to consider: How much will a university degree cost in X number of years? How long do you think your child will go to school for? (Two years, four years or more years for advanced degrees.) What amount can you afford to regularly sock away for expenses?

If we use the earlier figures from CollegeCalc that forecast what a four-year education will cost in 2039 ($375,167.67 / 4 = $93,792 a year), it�s recommended you put $741 a month into a college savings plan. This calculation assumes an after-tax return of 7%, an annual tuition increase of 7% and four years of school.

If you plan on covering some, but not all college expenses, you can tweak this formula to suit your situation. For instance, Fidelity recommends targeting a savings goal of $2,000 multiplied by your kid�s current age if you plan on covering 50% of college costs and assume your child will attend a four-year public school. The financial institution provides a couple of examples of parents covering different percentages of fees and what that would look like at different ages of their children.

There are other online calculators that can help you determine what you should save, depending on what your child�s future education plans might entail (like grad school). Again, a financial advisor or certified financial planner (CFP) can help you plan for college costs in way that accommodates your needs.

The Best Way to Save Money for Kids

If you want to save money, there are many ways you can go about it. Whether you�re thinking ahead to your child�s college education or just want to set aside a little something for when your child reaches a certain age, you have more than a few options to reach your savings goals.

Save early and save regularly, and you�ll be off to a good start.Contributor Kathleen Garvin (@itskgarvin) is a personal finance writer based in St. Petersburg, Florida, and former editor and marketer at The Penny Hoarder. She owns a content-writing business and her work has appeared in U.S. News, Clark.com and Well Kept Wallet.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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