Saving for College? How to Make the Most of Your Investment

College is not cheap. And as the price of attending a four-year university keeps increasing each year, parents and caregivers are getting more creative on how to finance such a big expense.

One strategy that’s working: Start saving early — years before your kid starts filling out college applications — even if it’s in small amounts. And in California, that’s become easier to do thanks to multiple college savings options and additional financial support provided by the government and non-profit organizations.

But how effective is it to start saving early? And most importantly, for parents who have to carefully balance the family budget each year, is it worth setting aside a handful of dollars each month for such a far-off expense?

Keep reading for what you need to know about saving for college, or jump straight to:

• San Francisco’s Kindergarten 2 College program
• The differences between college savings accounts
• What the state can offer
• How to talk to kids about saving for college

One mom’s story

Over a decade ago, San Francisco mom of four Aisha Brown sat down with her eldest daughter, Tierra, to talk about her college goals. Tierra was just in middle school at the time but she was already deeply motivated to get a degree.

Hearing her daughter talk about her dreams with so much determination gave Brown a feeling of pride, but thinking about saving money to pay for college felt insurmountable.

“I knew that it was going to be a struggle trying to put my kids in college,” said Brown, adding that even applying to college comes with a price tag — application fees, testing fees, visiting college campuses and other related costs.

And as Brown started to do the math, she remembered that she had been saving for Tierra’s college costs for several years already. When Tierra was in kindergarten, the city opened a savings account in her name and deposited $50, and Brown had also added money whenever she could. Tierra, now in her second year studying nursing at Grambling State University in Louisiana, was part of the founding class of Kindergarten 2 College (K2C), San Francisco’s universal college savings account program for kids enrolled in the city’s public schools.

“I looked at the K2C account and I said to myself, ‘Well, that can help with [application costs],’” Brown explained. At that point, they had a little over $1,000. “That’s not tuition money, but it’s something.”

And as Tierra grew and moved through high school, Brown kept saving and learned a few things along the way about how to make the most of what she was setting aside. For many families, even a few hundred dollars each month can make a big difference in household expenses. So if you’re planning on starting to save up for college for your little ones, here’s a few things to keep in mind to make the most of this hard-won investment in the future.

The positive side effects of saving for college

Earlier this month, researchers from the University of Michigan and Summitlab Corporation presented the findings of a years-long study that tracked college enrollment data among San Francisco Unified School District students. The study compares the college enrollment of students who graduated high school in 2023 — who were the first group to be part of K2C when the program began in 2011 — with those who graduated in 2022 and started kindergarten before K2C launched.

In both groups, white and Asian students (identified in the study as “represented students”) enrolled in college at higher rates than Black, Latino, Filipino, Pacific Islander and Native students (“underrepresented students”).

However, the gap between represented and underrepresented students was smaller in the class of 2023 — the first K2C group — than in the class of 2022.

“The gap between the represented and underrepresented groups narrowed by 30% relative to the gap in the comparison group,” said William Elliott, a professor at the University of Michigan’s School of Social Work and one of the authors of the study. Elliott has been studying CSA services for years and is familiar with the various positive impacts that these accounts have on students who come from lower-income families.

Having these accounts — and using them — can give kids and their families what Elliot describes as “tangible hope.”

“Tangible hope is when you have reasons in your world, in your environment, that make achieving your dream seem reasonable,” he said. “It’s not that you have all the money [for college] today, but rather the perception that you now have a strategy for how to pay for college.”

It’s critical to also pair this feeling of tangible hope with concrete steps. As your child grows up and gets closer to college, make the times you deposit into their account also an opportunity to talk to them about preparing for college. These conversations don’t have to only be about having the money to pay for school, but can also encompass other ideas like grades, tests and information about specific universities or majors.

After all, having a college savings account (known as CSA) doesn’t mean you’ll automatically have the funds to go to college – but it gets you one step closer to figuring out some really big questions.

“You are giving families access to an institution that allows them to build wealth that’s coupled with a change in attitude and reflecting on what’s now achievable for them,” Elliot said.

There are many types of college savings accounts. Know the differences

Not all CSAs are the same. Some only serve families in specific cities or who have kids starting at a certain age. There are some options, like San Francisco’s K2C, that offer cash incentives when students take time to explore their account or learn more about personal finance. Others offer an experience that somewhat resembles having an investment portfolio, where families can see annual returns based on what they save.

In San Francisco, every student enrolled in the district’, regardless of their grade or academic performance, already has a K2C account in their name with $50 deposited in it, made possible by the Office of the City Treasurer. Parents don’t have to do anything to open up their child’s account – that’s done automatically for them. But if they want to contribute to the account, see the balance, or withdraw the savings when it’s time for college, they need to visit the K2C portal and register their child’s information.

Nonprofit organizations that help Oakland families save for college

The nonprofit Oakland Promise manages two similar programs: Oakland Promise Kindergarten to College helps open savings accounts for families in Oakland public schools and offers scholarships for students who graduate high school, and the Brilliant Baby program, opens college savings accounts with $500 already added, for families who recently had a baby and who qualify for Medi-Cal or food stamps.

Families in Oakland Promise’s Kindergarten to College program have two options: they can either open a college savings account with Self-Help Federal Credit Union at the West Oakland branch or open a 529 plan, a college savings plan that in many cases offers annual returns to the account.

California-based college savings programs

Wherever you live in California, you can always open up a 529 account – even years before your child starts school, thanks to the state’s own 529 plan: ScholarShare 529.

Families can define their financial goals and set the length of time they want to save for. They can even choose for savings to go into bigger investment portfolios, which comes with risk, but also the possibility of annual returns.

Another savings option California offers for families across the state is CalKIDS. Two groups of young Californians are eligible for CalKIDS: children born on or after the creation of the program on July 1, 2022 and current K–12 students enrolled in any California public school who are unhoused, enrolled in a foster youth program or are considered by the state to come from lower-income households.

You don’t have to be the parent or the child’s legal guardian to make a deposit into a CSA. These accounts make it very easy for relatives and friends to make deposits into these accounts.

One option is to share your child’s CSA account details to folks who are unsure what to give as a birthday present, making sure to let them know that each dollar received can only be used for educational purposes. And that way, your community can support this goal as your child grows up.

Something else to look out for: Some CSA programs will add cash into your account if you or your child take certain online courses or participate in contests. In San Francisco’s K2C, for example, whenever students take time to explore their account or learn more about personal finances, the program rewards them by adding small amounts into their accounts.

Check your student’s CSA website to learn more about specific cash incentives available for your account.

Overall, college savings is a family affair

The most important piece of advice Brown has for fellow parents: “Make sure your kids understand what this program is.”

In San Francisco, it’s common for kids during kindergarten or the start of elementary school to go on a field trip to the bank where they can walk up to the teller and make a contribution to their K2C savings account. That’s a great experience, Brown says, but adds that it’s also very important for a family to sit down and talk about what that experience means.

“Maybe they’re not really paying attention then to what their college future or college goals may be,” she said. “But I think having those continuous conversations will help children understand how important college is to them, their family and how they want to get there and what it takes to get there.”

Remember, it’s normal to feel a little discouraged as a parent during these conversations, considering the overall costs of college that might feel hard to reach. But when talking to your child, Brown recommends explaining how “starting small can lead to something, and even if parents feel they don’t have anything — something is better than nothing.”

And if you feel your kid may be too young to focus on the complexity of college finances or savings, start off with something that feels more familiar – even if that’s just explaining the exciting concept of college itself. As chief programs officer for Oakland Promise, Veena Pawloski has spoken to hundreds of families, many of them in which both parents and children are approaching the topic of college for the first time. Her advice to get a conversation started with a family is asking, “Have you heard of college? What do you know about college?”

“Then we start talking from there because if you just start talking about a college savings account, it’s super overwhelming,” she said.