Kantrowitz recommends allocated investments in the 529 based on how old your child is. This means choosing a more aggressive investment mix—like 80 percent or more in stocks— when your kid is young, so if the market does crash, you have time to recover and the losses will be minimal. “As college approaches, you should shift into a mix of investments where there is low or no risk of loss, to lock in the savings,” says Kantrowitz. One thing to keep in mind about 529 accounts—while you can make tax-free withdrawals from the account to pay for education-related costs that qualify, once you take money out of the account for tuition, FAFSA will consider it income for the next two years, and it may affect your child’s eligibility for financial aid. “Some experts suggest holding off making contributions from your 529 plan until students are college juniors and have filed their last FAFSA,” says Jack Schacht, founder of My College Planning Team. Look within your county for local scholarships your teen can apply to as well, because the competition will usually be less than a big national scholarship. “The more specific the scholarship, the less competition,” says Gorman. She recommends the website Going Merry to her students, which has a wide range of scholarships that your student can apply to. The site allows students to apply to similar scholarships using the same essay—which is a big plus if the thought of writing a ton of essays on top of schoolwork could scare a teen off from applying. Consider having your teen rent their prom outfits, or opt for a budget-friendly graduation party at home, so you can still celebrate those special senior year moments while saving most of your money for college. Based on current costs, you should save $270 per month for a child born this year who will attend an in-state public college, $420 per month for out-of-state, and $510 per month for a private college. Start the college savings—and the conversation—early so you and your child can make the best academic and financial choice for their future.
