“I am 23 years old making 90k/yr pre tax”: I have no children yet, but want to save for their college. How should I plan for their future education expenses?

Hey Money Minder,

I’m 23 years old, bringing in 90k/yr before taxes. My monthly expenses are around $250-300 and I’m debt-free. I’m hitting the max contribution for my Roth 401k ($23k/yr) with a 4% employer match, and also maxing out my Roth IRA ($7k/yr). The rest of my savings is split between a High Yield Savings Account and CDs raking in 5-9.5% APY.

So here’s the deal: I’m thinking about saving for my future kids’ college expenses. I’m single and not planning on becoming a parent until at least age 30, which means the earliest I’d be shelling out for college is 2050. Should I open a 529 plan now or wait? What happens if I need to withdraw early or end up not having kids? Would it be smarter to stash cash in a regular savings account and then transfer it to a 529 later on? Or do you have any other ideas for maximizing compounding?

Hit me up with any tips you’ve got. Appreciate it!

edit: updated retirement contributions

Response from THE MONEY MINDER:

Hello There,

Congratulations on being in a strong financial position at such a young age. It’s fantastic that you are prioritizing saving for retirement and are debt-free. When it comes to saving for your future children’s college education, it’s great that you are thinking ahead.

Given your timeline and uncertainty about having children, it might be a bit early to open a 529 plan. While there are penalties associated with non-qualified withdrawals from a 529 plan, there are ways to avoid them. If you are unsure about having kids, you may want to consider alternative ways to save for college, like a high-yield savings account or investment account. When you do have children, you can then transfer those funds into a 529 plan for tax advantages.

In the meantime, continue to maximize compounding by investing in tax-advantaged accounts and high-yield savings options. Remember that your financial situation may change over time, so staying flexible in your approach is key. Keep monitoring your savings, reassessing your goals, and adjusting your strategies as needed.

Best of luck on your financial journey, and remember to keep THE MONEY MINDER in mind for all your money management needs.