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Budgeting and Saving

College Fund for Kids

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How to Save for College

The team at Flagstar Bank understands that every parent wants to set his or her child up for success. But, with so many options and avenues to do so, it’s easy to get overwhelmed. That’s why we’ve outlined some key methods to create a college fund for kids that supports your child’s dreams for the future.


1. Saving

Starting a college savings fund early, also known as pre-funding, is one of the most highly recommended methods among experts. With enough of a head start on pre-funding, you can spread the cost of college over a long period of time and into smaller payments.

Many people choose to pre-fund with a 529 plan, a tax-advantaged1 investment vehicle specifically designated for higher education. Some 529 plans are state-sponsored; the tax benefits to these may vary based on state legislation. Other people choose to pre-fund by upping their contributions to their traditional and/or Roth IRA(s), as withdrawals from such accounts for higher education purposes aren’t subject to the same tax penalties as other early withdrawals.

2. Borrowing

If saving isn’t an option, or if you’re looking to supplement what you’ve already saved, you could have a myriad of borrowing options, depending on your financial situation.

If you are a homeowner, a loan from your home equity may come with lower interest rates than a traditional education loan. However, if you are unable to make payments, you risk losing your home.

There are also many traditional loans geared toward higher education. As a parent, you may be able to cosign on your child’s loans or take out a loan on their behalf. Your child may also be able to sign for a loan on their own. Both of these choices have government and private options, with variable interest rates and repayment plans.

How to Choose Which Plan Is Right For You

If you’re able, consider pre-funding as early as possible. Some 529 plans allow you to make contributions as low as $50 a month, with further reductions for setting up payroll deductions or auto-contributions.1 Even if the only contribution you can make is small, that money can grow to become substantial, if allowed enough time to mature.

As your kid approaches college-age, start working with them to determine their plans. That way, you can tailor or bolster your plans to suit their goals as well. (No need to start a college savings fund for a four-year university if your child wants to attend a trade school, for example.)

When you’ve gathered as much info as possible, don’t forget to shop around. Depending on your finances, different loans, grants, or programs may be available to you and your child.

We’re here to help.

No matter how you choose to start a college fund, Flagstar can help. We’ll make sure you’re on track to ensure your kid has the best chances at success.

Get started

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Investment and insurance products and services are offered through Osaic Institutions, Inc., Member FINRA/SIPC. Investment & Insurance Services at Flagstar Bank is a trade name of Flagstar Bank. Osaic Institutions and Flagstar Bank are not affiliated. Products and services made available through Osaic Institutions are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.


Investors should consider, before investing, whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Consult your tax advisor, Rebecca and Foreman, Daphne. “How to Choose a Business Checking Account.” Forbes, November 3, 2020.