College costs have risen significantly faster than inflation for decades, and the trend shows no signs of reversing. The earlier families start saving — and the more intentionally they approach it — the less financial stress they face when their child reaches 18. This is one of the planning conversations I have most often with parents of young children.
Here’s my practical guide to college savings for Texas families.
Start With a Target Number
Before you save, you need to know what you’re saving toward. College costs vary widely based on whether your child attends a public in-state university, a private college, a community college, or an out-of-state school. I recommend using the calculator at the end of this article to estimate a realistic target based on current costs and projected inflation.
Open a Dedicated College Savings Account
I always encourage keeping college savings completely separate from your general savings or emergency fund. A dedicated account is harder to raid for non-college expenses, and the right type of account can offer meaningful tax advantages.
The 529 Plan: My Top Recommendation for Most Families
A 529 college savings plan is the vehicle I recommend most often, and for good reason:
- Contributions grow tax-deferred
- Withdrawals are completely tax-free when used for qualified education expenses
- Texas offers its own 529 options with additional benefits worth exploring
- Unused funds can be transferred to another family member or, under newer rules, rolled into a Roth IRA (subject to limits)
One important point many families don’t realize: you’re not required to use your home state’s 529 plan, and your child isn’t required to attend school in the state whose plan you choose. Funds from any state’s 529 savings plan can be used at eligible colleges and universities across the country. That said, some states offer a state income tax deduction or credit for contributions to their own plan, so it’s worth checking whether your state provides one before looking elsewhere. If your state offers no tax benefit — or you simply prefer another plan’s investment options and fees — you’re free to shop nationally.
For my Texas clients, the state offers the Texas College Savings Plan and the Texas Tuition Promise Fund (a prepaid tuition plan), but since Texas has no state income tax, there’s no deduction lost by choosing an out-of-state plan. I’m happy to help you compare the options that make the most sense for your situation.
Automate Contributions — Even Small Ones
Set up an automatic monthly transfer to your 529 or savings account. Even $50–$100 per month started early adds up significantly by the time your child reaches 18. I tell clients: don’t wait until you can contribute “more.” Start now with what you have.
Put Windfalls to Work
Birthday gifts, tax refunds, bonuses, and other windfalls are excellent college savings opportunities. Rather than absorbing them into everyday spending, I encourage depositing a portion directly into your child’s education account.
Other Strategies Worth Considering
- Redirect a paid-off loan: When you finish paying off a car or other loan, redirect that monthly payment to college savings instead of spending it elsewhere.
- Check employer benefits: Some employers offer education savings matching programs or payroll deduction options.
- Leverage cash-back rewards: Some credit card programs allow you to direct cash-back rewards into a 529 account.
Don’t Count on Financial Aid Alone
Scholarships, grants, and merit aid can reduce the amount you need to save — but they’re not guaranteed. I encourage families to plan as if they’ll cover the full cost and treat financial aid as a bonus, not a strategy.
Find Out How Much You Need to Save