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{This is a collaborative post}
Learn what to avoid and how to build a smarter savings plan that sets your child up for success.
As parents, we want nothing more than to give our children every opportunity in life—especially when it comes to their future. Whether that means helping with college tuition, supporting their first big move, or simply giving them a financial cushion, saving for your child’s future is a major priority for many families. But even with the best intentions, it’s easy to make mistakes along the way. From starting too late to choosing the wrong type of account, some of these missteps can seriously impact your savings potential—and your child’s opportunities. The good news? With a little planning and a clearer understanding of what not to do, you can avoid these pitfalls and set your child up for long-term success.
Mistake #1: Waiting Too Long To Start Saving
One of the most common—and costly—mistakes parents make is delaying their savings journey. When your child is first born, it might feel like college is a lifetime away. Diapers, daycare, and doctor’s appointments take priority, and understandably so. But time is your most powerful asset when it comes to saving for your child’s future.
The earlier you start, the more you can benefit from compound interest, which allows your money to grow not just on the original amount you’ve saved but also on the interest your money earns over time. Even modest, consistent contributions made early can grow into a much larger sum by the time your child is ready to head off for college, start a business, buy a home, or pursue whatever dreams they may have.
Mistake #2: Prioritizing College Savings Over Retirement
It’s incredibly common for parents to put their kids first—especially when it comes to something as important as education. But when it comes to long-term financial planning, there’s a delicate balance to strike.
One of the biggest mistakes parents make is prioritizing college savings over their own retirement. It may feel like the right thing to do at the moment, but it can create major financial strain later on—for both you and your child. Here’s the thing: There are no loans for retirement.
While your child can access a wide range of funding options to pay for college—scholarships, grants, work-study programs, and student loans—you won’t have those same resources available to you when it’s time to retire. If you drain your savings or stop contributing to your 401(k) or IRA to cover tuition, you may end up relying on your child for financial support in the future. That’s not the legacy most parents want to leave behind.
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| Image Credit: Pexels |
Mistake #3: Choosing the Wrong Savings Account
Traditional savings accounts offer minimal interest, zero tax advantages, and limited long-term growth. While they’re a safe place to stash emergency funds or short-term savings, they’re not the most effective tool for building wealth over time.
To make the most of your efforts, you’ll want to explore accounts that are designed for growth, flexibility, and tax efficiency. Here are some smarter alternatives:
- 529 College Savings Plan: A popular, tax-advantaged account specifically for education savings. Contributions grow tax-free, and qualified withdrawals (for things like tuition, books, and even room and board) are also tax-free. Many states even offer tax deductions or credits for contributions.
- Custodial Roth IRA: If your child has earned income (from a part-time job, babysitting, freelance work, etc.), a Custodial Roth IRA is an incredibly powerful and underused tool. Contributions grow tax-free, and withdrawals in retirement are also tax-free. But here’s the twist: Roth IRAs allow penalty-free withdrawals of contributions at any time, and earnings can be used for qualified education expenses without the 10% early withdrawal penalty.
- UGMA/UTMA Accounts: These accounts allow you to save or invest money on your child’s behalf for general future expenses. However, once the child reaches the age of majority (typically 18 or 21), the money becomes theirs to use however they choose. These accounts also count more heavily against financial aid and lack tax benefits compared to other options.
Mistake #4: Not Having a Clear Goal
When it comes to saving for your child’s future, winging it just doesn’t cut it. One of the most common mistakes parents make is not having a clear plan in place. Saying “we’ll save what we can when we can” might sound reasonable, but without a defined goal or strategy, it’s incredibly easy to fall behind—and hard to measure progress.
Saving without a plan is like setting out on a road trip with no destination, no map, and no idea how much gas you’ll need. You may end up somewhere good... or you may run out of fuel halfway there.
Your plan should include:
- Target Goal: Determine how much you’d like to save by the time your child turns 18. Will you be covering full tuition? Just room and board? A portion of costs? Be realistic based on your income and expected expenses.
- Timeline: The earlier you start, the longer your money has to grow. Define key milestones (like saving $10,000 by age 10, for example) to keep your plan on track.
- Monthly Contributions: Break your total goal into monthly savings goals. Automating contributions helps you stay consistent without having to think about it every month.
- Review Points: Set regular intervals—once or twice a year—to revisit your plan and adjust if necessary. Life happens: incomes change, expenses shift, and goals evolve.
Knowing your numbers helps you move forward with confidence and gives you a better chance of achieving your vision.
Mistake #5: Not Talking About Money With Your Kids
One of the most powerful tools you have when it comes to preparing your child for the future is communication, and yet, many parents avoid talking about money with their kids. Whether it’s because they think it’s too stressful, too complicated, or simply not age-appropriate, skipping these conversations can lead to confusion and unrealistic expectations.
Saving for college or your child’s future shouldn’t be a secret mission. In fact, involving your child in the process (at the right level for their age) can help them better understand the value of money, the cost of higher education, and the role they may need to play in funding it. When you feel it’s the right time to talk with your kids about their financial future, here’s what you should talk about:
- How much you’ve saved and what portion of their education (or future expenses) you hope to cover.
- Expected contributions from them—whether that’s applying for scholarships, working part-time, or taking out reasonable student loans.
- The true cost of college includes hidden expenses like textbooks, transportation, and living costs.
- The long-term impact of student loans, including interest rates, monthly payments, and how debt might affect their lifestyle after graduation.
You don’t need to overwhelm them with spreadsheets and financial jargon, but sharing the big picture and talking through your family's values around money can build trust, reduce anxiety, and empower them to make informed choices.
We all want to give our kids the best shot at a bright future—and that starts with smart, intentional planning. While it’s easy to get caught up in day-to-day expenses or feel like you're behind, it’s never too late to adjust your approach. By staying informed and avoiding these common pitfalls, you can give your child not just a financial head start but the confidence and security that come with it.
