How to Start Investing for Your Children's Education

The average cost of a raising a child through age 18 is now more than $230,000.


Should I start investing in any college savings funds now, for my future children? originally appeared on Quora, the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google Plus.

It’s great to plan ahead. So the short answer is yes, it’s best to save for your children’s futures as early as possible. But the explanation requires taking a look at where things stand.

The average cost of a raising a child through age 18 is now more than $230,000, according to the U.S. government. (You can estimate your total at the USDA website.) Morgan Stanley found that the cost jumped nearly 70% over just 15 years.

Between that and other aspects of the economy, parents rarely have a lot of extra income sitting around to put into college funds. In fact, while 98% of parents say saving for other child’s future is important, only 57% managed to save anything in the previous year.

‘Extreme’ need for financial aid

Meanwhile, the cost of college has continued to soar. The College Board finds that tuitions and fees are up at private and public colleges. So, to many parents, saving enough to one day pay for college seems to be an insurmountable challenge -- and the magnitude of that challenge can prevent us from getting started.

Then time flies and, before we know it, our kids are in high school. A survey found that parents plan to cover 70% of the total cost of college, but they’re on track to cover only 29% by the time their child starts freshman year.

This helps explain why the number of parents who say financial aid is “extremely” necessary spiked from 63% in 2017 to 69% in 2018, according to annual reports from the Princeton Review.

Why saving matters

Though it can seem overwhelming, there are still very strong reasons to start a college fund. The biggest is that kids with even just a small amount saved up are much more likely to graduate from college.

The figures on this are staggering. A study by researchers at Washington University in St. Louis focusing on children from low- or moderate-income (LMI) families found:

“An LMI child with school savings of $1 to $499 before college age is more than three times more likely to enroll in college than an LMI child with no savings account and more than four and half times more likely to graduate. In addition, an LMI child with school savings of $500 or more is about five times more likely to graduate from college than a child with no savings account.”

Having at least some savings can also help reduce the stress experienced by parents and students when it comes time to face college costs. And the earlier you start an account, the more likely you are to add to it and let it grow over time. Likewise, teaching your kids the habit and practice of saving is a fundamental life skill that is essential for a secure future.

A new paradigm

As a mom, I was having these conversations with lots of friends. I realized there could be a solution that embraces technology and online communities to help alleviate some of this stress. So I I founded a startup, Kidfund, to help families save in a whole new way. We’re now working together with a leading nonprofit in this space, the Council for Economic Education.

Our users download our free app, create an account, save a bit of money when they can (we recommend auto-recurring transfers, no matter how small!), and get some interest. On their kids’ birthdays and other special occasions, instead of gifts they invite family and friends to make contributions into those accounts for their kids’ futures. Parents can show their kids’ their funds and the support they’ve received along the way from their community.

The benefits are far-reaching. It helps teach kids good savings habits and encourages them to plan for their futures.

This is also an arena in which we all can help each other. Rather than reinforcing the inequalities inherent in our communities, we’ve designed Kidfund for anyone to be able to donate a portion of their funds to families in need.

It’s important to speak with financial advisers to consider any and all options, including 529 college savings plans, which fewer people are using.

Saving money is hard regardless of your income level. Families today navigate all kinds of pressures that make it easy to spend and not as easy to save. We start with the best of intentions, but get distracted along the way. Even when we receive cash gifts they sometimes don’t make it that final mile into savings accounts. But if we get proactive and make saving something we can do just by tapping a button on our phones, it creates a healthy habit. And that, in the long run, can make all the difference.

This question originally appeared on Quora. More questions on Quora:

* Personal Finance: How should a young person invest money?

* Money: What are some good ways to teach kids the value of money?

* Parenting: What was your biggest reality check when you became a parent?

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