College Savings Accounts: 7 Types Compared for 2026

If saving for college is on your radar, there are several types of accounts to consider. In order to choose the best option for you, consider how much control you want over the funds, whether you might want to use the funds for something other than college, and how much you anticipate saving for college. You can even use a couple of types of accounts if that works best for you. And although it might be challenging to save enough to fully fund college, every little bit of savings helps. Do what you can when you can.

In this post, we’ll walk through the seven most common accounts used for college savings, how each one works, and when each account type might be the best fit. Then, we’ll zoom in on 529 college savings plans which tend to be a great option in most cases.

While the 529 is a great option, there are a huge variety of accounts you can choose to save with. From a Coverdell ESA to U.S. savings bonds to a Roth IRA, saving for your education has more choice than ever. The right account choice is based on your situation, so read on to figure out which account is the best fit for you, and how Monarch can help you keep track of your savings goals and make your college savings journey easier than ever.

#Key Takeaways

• There are a wide variety of college savings accounts available, many of which rely on investments as a way to help your savings grow and outpace inflation.
• Many college savings accounts, such as a 529, are tax-advantaged and offer many benefits over simply investing, so long as the funds are used for qualified educational expenses.
• Choosing the right plan and way to save will depend on your college goals, financial circumstances, and your preferences. Monarch is with you at every step of the college saving journey with digital tools, live tracking, and helpful ways to stay motivated.

#What is a College Savings Account?

A college savings account is a savings plan that can be used to save or invest money for educational purposes. While these accounts are typically used for college tuition, they can often be used to pay for other educational expenses such as K-12 education tuition, student fees, equipment and supplies, books, room and board, or for trade school, vocational school, or apprenticeships. This can help you avoid student debt in the long run and leave your kids more free to pursue their education without worrying about taking out loans.

Many college savings accounts are investment-based, as they allow the saved funds to grow with compound interest, which outpaces inflation and grows more quickly than most traditional cash saving methods. They are also often tax-advantaged and come with low or no fees, which encourages families to save.

#Types of College Savings Accounts

There are a variety of savings accounts available for students and their families. We summarized them and their key features in a table for you here.

Here are the account types in more detail. Note that while brokerage accounts can be a vehicle for college savings, they aren’t a taxed-advantaged account for education purposes and should be accounted for accordingly (more on this later).

#529 Plan Account

TLDR: 529 plans offer tax advantages and enable you to maintain control of the funds. The main potential downside of using a 529 plan is that there are taxes and penalties if funds are used for purposes other than education. If you’re looking to save money specifically for college and get some tax benefits, a 529 savings plan is likely a great option.

Anyone can open a 529 plan account, and you, as the owner of the account, have control.

#Flexibility

Funds in a 529 plan can be used for college education. If funds are used for other purposes, you’ll pay taxes and a 10% penalty on earnings. There are a few eligible expenses outside of college education that you can use your 529 for without federal taxes or penalties, but state income taxes may be due depending on your state.

#Contribution limits

Contribution limits vary from plan to plan, but are typically in the range of $235,000-$600,000 total per beneficiary.

#Taxes

Although the federal government doesn’t offer any tax benefits on 529 plan contributions, some states offer tax benefits on 529 plan contributions. Earnings grow tax-deferred, and if funds are used for qualified education expenses, withdrawals are tax free. If funds are withdrawn for other purposes, income tax and a 10% federal penalty will be due.

#State Taxes

You may be required to use your home state’s 529 plan to take advantage of tax benefits in your home state. However, as of 2026 there are nine states that allow you to contribute to ANY state’s 529 plan and still take a state tax deduction. Those states are Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio, and Pennsylvania.

For example, if you’re a New York taxpayer, you can deduct up to $5,000 ($10,000 for a married couple filing jointly) of your 529 plan contributions on your state tax return, but you have to use one of New York’s 529 plans to qualify. If you save into another state’s plan, you miss out on the NY state tax deduction.

There are also many states that don’t offer any tax benefits on 529 plan contributions (like California and North Carolina). If you live in a state that doesn’t offer tax benefits, you can choose from ANY state’s 529 plan.

#Gift Taxes

Amounts you contribute to a 529 plan account are considered gifts for gift tax purposes. However, you can contribute up to the annual gift tax exclusion amount ($19,000 per person, $38,000 for a couple in 2026) without having to file a gift tax return or pay any taxes, and you can “front load” up to five years of gifts per beneficiary into their 529 plan.

Contributions over the gift tax exclusion amount don’t necessarily trigger taxes right away, but they do count against your lifetime exemption amount ($15 million per person in 2026). Unless you anticipate that you’ll pass away with more than $15 million, you likely don’t need to worry about paying gift taxes.

#Impact on Financial Aid

529 plans typically have a smaller negative impact on financial aid eligibility than income; in fact, there is no impact if they are owned by a grandparent!

#Investment Choices

Virtually all 529 savings plans offer age-based portfolios which are typically a great option since they offer a broadly diversified investment portfolio that will automatically become more conservative over time as your child approaches age 18. Age-based portfolios are also automatically rebalanced which means that you can set it and forget it.

With many 529 plans, you can also choose between an aggressive, a moderate, or a conservative enrollment portfolio that is not based on the child’s age.

• An aggressive enrollment portfolio focuses more on equity and less on short-term fixed income, which provides a high-risk, high-reward profile that can heavily capitalize on dips and rises in the stock market in the long run, with the risk of higher short-term volatility.
• A moderate enrollment portfolio strikes a balance between equity and fixed-income investments, providing a mix of risk and security.
• A conservative enrollment portfolio focuses heavily on fixed-income investments, which provides slower growth in exchange for minimal volatility.

You don’t have to stick with one type of enrollment portfolio for the entirety of the child’s life. In fact, many advisors recommend starting with an aggressive enrollment portfolio when the child is young, switching to a moderate plan when the child is in middle school, and then transitioning to a conservative plan when the beneficiary is prepared to start withdrawing for educational expenses in late high school and college.

Monarch Pro Tip: If you have one or more 529 accounts, you can use Monarch’s account linking feature to keep an eye on the balances and the growth in real time – no more juggling multiple logins!

#Qualified Expenses

There are a range of expenses you can pay for with your 529 without penalty, some of which go beyond paying for your college tuition. These include:

• Education expenses at a US accredited college, university, trade school, vocational school or training program, including tuition, books, fees, and supplies.
• Room and board at an accredited institution, so long as this amount does not exceed the allowance calculated by the institution in their federal financial aid estimates, or how much the student is charged by the institution (whichever is greater).
• K to 12 education. You can withdraw and spend up to $20,000 for K-12 education tuition per beneficiary, in tax years beginning after Dec. 31, 2025, including testing fees, curriculum materials, tutoring, tuition, and educational therapy. Some states do not consider this a qualified expense and you may incur state income taxes or penalties for withdrawals for this purpose.
• Student loan repayments. Students can withdraw up to $10,000 lifetime limit to repay student loans without penalty. Parents, if they are named as the account beneficiary, can also do so to pay for parent PLUS loans up to the same limit.
• Apprenticeship programs. 529 funds can be used for any apprenticeship program registered with the US Department of Labor, including tuition, fees, and required supplies and safety equipment.

#Advisor vs. Direct Sold

After narrowing down which states’ plans to consider based on tax benefits, the next step is to decide between an advisor-sold or a direct-sold 529 plan.

• An advisor-sold plan includes the help of a financial advisor to help you set up your 529 plan and choose investments, with the associated fees involved. 
• A direct-sold plan allows you to set up your 529 yourself. Fees in advisor-sold plans tend to be significantly higher than direct-sold plans, and given that most 529 plan providers offer online account opening as well as age-based portfolios that make choosing investments for your 529 plan super straightforward, using a direct-sold plan is typically a better, more cost effective option. You will have to research and select the investment options yourself, however.

#529-to-Roth IRA Rollovers Under SECURE 2.0

If you don’t end up using the funds from your 529 for qualified expenses, you can still access them by rolling them over to a Roth IRA. This was established in 2024 by the SECURE Act 2.0, and allows beneficiaries to roll over up to $35,000 in their lifetimes, per beneficiary.

In order to do this, the following conditions must be met:

• The 529 account must have been open and for the benefit of the specific student for at least 15 years
• The beneficiary must roll over the funds into a Roth IRA in their name – not that of a sibling or anyone else
• You can only roll over up to the annual Roth IRA limit minus any other IRA (traditional or Roth) contributions made separately from the 529 funds each year, or face tax penalties
• You can only roll over contributions made to the 529 that are at least five years old. Any contributions that have been made within the previous five years if the rollover are ineligible.

Because of these limits, it may take several years to fully roll over the funds in a 529 to a Roth IRA. However, it is still a tax-free way to keep your 529 funds invested and growing if you choose not to use them for education or transfer to a sibling, and be able to access them at retirement time.

In order to initiate a rollover, you would need to open a Roth IRA in the 529 beneficiary’s name, and then formally request a rollover through your 529 provider.

#UGMA/UTMA

TLDR: A Uniform Gift to Minors Act (UGMA) account or Uniform Transfer to Minors Act (UTMA) account enables you to transfer money into your child’s ownership and manage it for your child until they reach adulthood. 

UGMA/UTMA accounts are a way to gift funds to your child that you can’t take back. When your child reaches adulthood, they have complete control over the funds and can use them for anything they want - college, a motorcycle, starting a business, anything. Losing control of the funds when your child becomes an adult is the primary reason that parents tend not to choose this type of account.

That said, if you’re looking for an account that doesn’t require funds to be used for college, and you like the idea of the money belonging to your child when they reach adulthood, an UGMA/UTMA account can be a great option.

#Eligibility

Any adult can open an UGMA/UTMA account for a child.

#Control

If you open an UGMA/UTMA for your child, you have control over the investment choices and use of funds for your child’s benefit until they reach adulthood. Once your child is an adult (which ranges from age 18 to 21 depending on your state’s definition, with some states allowing you to maintain custody of the funds until the child is age 25), you no longer control the account and your child has complete control over the funds. Your child is not required to use the funds for college and has the freedom to use the funds for any purpose they choose.

#Flexibility

Funds in an UGMA/UTMA account can be used to pay for any expenses to support your child while they’re still a minor. Once your child is an adult, funds can be used for college expenses or any other purpose.

#Contribution Limits

UGMA/UTMA accounts do not have contribution limits.

#Taxes

There are no tax benefits on contributions to, or distributions from, UGMA/UTMA accounts. Earnings in the account may be taxed at your child’s tax rate instead of your tax rate, which can be advantageous, but there is a “kiddie tax” rule that limits the amount of earnings in an UGMA/UTMA that can be taxed at your child’s tax rate. Earnings above the kiddie tax limit are taxed at your tax rate.

Specifically, for both the 2025 and the 2026 tax year, the first $1,350 qualifies for standard deduction, the next $1,350 is taxed at the child’s rate (based on investment and other income), and anything above $2,700 is taxed at the parent’s marginal rate.

#Gift Tax

Amounts you contribute to an UGMA/UTMA account are considered gifts for gift tax purposes.

#Impact on Financial Aid

UGMA/UTMA accounts are considered assets of the student for financial aid purposes, which means that they have a bigger negative impact on financial aid eligibility. Specifically, the student’s eligibility for aid is reduced by 20% of the UGMA/UTMA account value when filing the FAFSA. 

#Investment Options

The funds within an UGMA/UTMA account can be invested in a broad range of investments including stocks, bonds, mutual funds and ETFs, but they typically do not offer age-based investment options.

#Who a UGMA/UTMA is Best for

A UGMA/UTMA can be a flexible way to gift funds to minors in a way that is protected and that can go beyond funding college education, which can be useful for minors who you believe may not have educational expenses and instead will want to use the funds to buy a house, invest on their own terms, or otherwise. However, it does take a high degree of trust, as you cannot access the funds once they are gifted, and the account beneficiary gains full use of the funds upon reaching the age of 18.

Monarch Pro Tip: If you’re saving on someone’s behalf, you can add family members to your Monarch account so you can both see the balance on your UGMA/UTMA and set shared savings goals.

#Coverdell ESA

TLDR: Coverdell Education Savings (ESA) accounts have many of the same benefits as a 529 plan, but substantially lower contribution limits ($2,000 annually). In addition, higher income earners aren’t eligible to open Coverdell ESAs. For these reasons, 529 plans tend to be a better option for college savings. 

#Eligibility

You can open a Coverdell Education Savings Account (ESA) if your modified adjusted gross income (MAGI) is less than $110,000 for single filers or $220,000 for joint filers in 2026. If your MAGI is between $190,000 and $220,000 for joint filers or between $95,000 and $110,000 for single filers, the amount you can contribute to an ESA is reduced. If you qualify for a Roth IRA, you likely qualify to contribute to an ESA, although the limits are slightly different.

#Control

You, as the parent, control the account, but once the beneficiary turns 30, you’ll have to distribute any remaining balance to your child or roll it to another beneficiary.

#Flexibility

Funds in a Coverdell ESA account can be used for elementary, secondary, and postsecondary education. If funds are used for other purposes, you’ll pay taxes and a 10% penalty on earnings.

#Contribution Limits

Contributions are limited to $2,000 annually for ESA accounts. If you plan to save more than $2,000 annually, an ESA is likely not the right fit for you.

#Taxes

There are no tax benefits on contributions. Earnings grow tax-deferred for federal tax purposes. If funds are used for qualified education expenses, withdrawals are federally tax free.

#Gift Tax

Amounts you contribute to a Coverdell ESA account are considered gifts for gift tax purposes.

#Impact on Financial Aid

Coverdell ESA accounts typically have a smaller negative impact on financial aid eligibility. Specifically, only up to 5.64% of the ESA is considered in the family’s expected contribution when financial aid is considered through the Free Application for Federal Student Aid (FAFSA).

#Investment Options

One of the key advantages of a Coverdell ESA is the flexibility in investment options. The funds within a Coverdell ESA account can be invested in a broad range of investments including stocks, bonds, mutual funds and ETFs that you can select individually, unlike 529s, which only allow investment options and portfolios in your plan.

On the downside, Coverdell ESAs typically do not offer age-based investment options like a 529.

#Who a Coverdell ESA Best for

Coverdell ESAs work well for families who make below the income threshold and want to have more flexibility in how they invest and pay for their child’s education. It can be a good complement to a 529, and act as a way to diversify your investment in a tax-advantaged way.

#Roth IRA

TL:DR: Roth IRAs, while traditionally used for retirement, can be used for qualified educational expenses without incurring the pre-59½ withdrawal penalty. Since you contribute your post-tax income to a Roth IRA, qualified withdrawals are tax-free, offering a tax-advantaged way to save. They also offer more control over investment choices and strategy than a 529. However, these accounts are meant for retirement, meaning that they shouldn’t be your first choice for college savings.

#Eligibility

Anyone with earned income can open a Roth IRA, with the option of a custodial IRA if the beneficiary is under the age of 18. Once the beneficiary turns 18, you can transfer ownership.

#Control

You have a great amount of control over the investments you can choose with a Roth IRA, more so than a 529. You can actively trade stock options, and you’re not limited by a plan or portfolio.

#Flexibility

You can withdraw Roth IRA funds for qualified educational expenses without paying the penalty. Anything outside of the qualified expenses will incur a 10% penalty on top of the taxes you’ll be paying on the withdrawals. These qualified expenses include:

• Tuition, fees, books, and supplies for a student at a qualified postsecondary institution of education
• Room and board, so long as the student is at least a half-time student
• Expenses for special needs services in relation to the student’s education

Of course, you can also use the funds for retirement once you reach age 59½, which can be used for any expense you’d like once you reach that point.

#Contribution Limits

Roth IRAs come with a yearly contribution limit based on income. If you have opened a custodial Roth IRA, you can contribute 100% of your child’s income up to $7,500 for 2026. For a regular Roth IRA, the limits are based on income.

• Incomes of less than $153,000 can contribute up to $7,500
• Incomes of $153,000 or more but less than $168,000 will have their contributions capped on a pro-rated basis
• Incomes of $168,000 or more cannot make any contributions

#Taxes

One of the benefits of qualified Roth IRA withdrawals is that they are tax-free, since you’ve already paid taxes on the contributions. This means any growth the Roth IRA has experienced can be withdrawn tax-free.

#Impact on Financial Aid

One downside of a Roth IRA is that withdrawals are reported on your FAFSA as income, which can lower the amount of student aid you are eligible for. However, if you or your parents have a Roth IRA, it does not count as an asset on your financial aid assessment.

#Investment Options

You have a wide variety of investment options with a Roth IRA, including mutual funds, stocks, bonds, and ETFs. You can choose which of these investments you would like to be a part of your portfolio and your general investment strategy through your plan.

#Who a Roth IRA is Best for

A Roth IRA can be a flexible way to invest and save for education in addition to a 529, offering more investment options and the ability to use the remainder of your account balance for retirement while enjoying tax-free withdrawals. However, it shouldn’t be the first option for paying for college, especially since you can hurt yourself in the long run if you leave yourself with not enough for retirement.

Monarch pro tip: If you’re working with a financial advisor or planner, you can add them on Monarch and allow them to see the balance and progress of your retirement and savings accounts for real-time tracking.

#Prepaid Tuition Plans

TL;DR: Prepaid tuition plans enable you to purchase future college credits at today’s prices. Purchasing credits directly means that you don’t have to worry about future inflation of college costs or stock market performance because you already own the credits. Although a prepaid tuition plan sounds like a great option in theory, investing the same amount of money in a 529 savings plan typically gives you more purchasing power by the time your child starts college.

#Eligibility

Generally prepaid tuition plans are available to U.S. citizens, though most plans require you to be a resident of the state that offers the plan. Only nine states have prepaid tuition plans: Florida, Massachusetts, Michigan, Mississippi, Nevada, Pennsylvania, Texas, Virginia, and Washington, each bearing their own rules, restrictions, and conditions for saving and using the credits. While there is a private option available through the Private College 529 Plan, it is limited to participating private colleges.

#Flexibility

Prepaid plans have more restrictions than 529 savings plans. For example, in many prepaid plans, tuition credits are only redeemable at full value at an in-state public university. If your child chooses to go out-of-state or chooses a private school, the amount you get back from a prepaid plan is often limited to your original contribution and a small amount of interest. Prepaid plans can also become underfunded and might even charge more than the going rate for tuition today.

Moreover, prepaid tuition plans can only be used for college tuition, and not room and board, books, equipment, K-12 tuition, or other education-related expenses.

#Contribution Limits

Limits will depend on the state, but will be the same as 529 limits.

#Taxes

As they are a type of 529 plan, prepaid tuition plans are subject to a gift tax after the exclusion amount ($19,000 per person, $38,000 for a couple in 2026). Otherwise, they are generally not subject to state or federal taxes.

#Impact on Financial Aid

As they are technically 529 plans, prepaid tuition plans are counted as 5.64% against the potential aid you may receive.

#Who a Prepaid Tuition Plan is Best for

While prepaid tuition plans can be a good way to dodge inflation and the rising cost of college, it’s limited and inflexible in who can access it and what it can pay for. It can be a fair supplement to a traditional 529, but you may be better off with a more flexible investment or savings plan, especially if you end up moving or if the student in question isn’t thinking of attending your in-state school.

#U.S. Savings Bonds

TL;DR: Bonds are loans given to you by the government, with guaranteed interest that is paid out when you cash out the bond after a given period of time. They grow slowly and consistently, and savings bonds in particular have the potential to be tax-exempt if used for qualified education expenses.

#Eligibility

Savings bonds can be purchased by anyone with a Social Security number, including citizens, naturalized residents, and eligible workers.

#Control

Since a bond is issued and guaranteed by the U.S. Government, you’ll be set with whatever interest rate is on the bond. Series EE bonds have a fixed interest rate, and Series I bonds have both a fixed and variable rate set by the consumer price index. As such, you don’t have much control in how you can make your bond grow, save for when you choose to cash it out.

#Flexibility

Savings bonds can be redeemed for their amount plus interest at any point after one year post-purchase. Since they’re redeemed for cash, you can use it for any expense both college related and otherwise, though you will be taxed for interest. If you want tax exemptions, you’ll have to meet certain criteria (see below.)

You can only sell a bond back to the U.S. government or a financial institution, not an investor.

#Contribution Limits

You can only purchase up to $10,000 per year of each bond series type, for a total of $20,000.

#Taxes

Normally, you would have to pay taxes on any interest earned on savings bonds. However, if you use the bond to pay for higher education, your interest is tax-exempt. In order to do so, you need to meet the following conditions:

• It must be a Series EE or I Savings bond issued after 1989.
• It must be registered in your name.
• The holder must be 24 years of age or older.
• Your MAGI must be below the IRS threshold. For 2025, it’s $114,500 or more for single filers, or $179,250 if married filing jointly.
• The bond is cashed out the same year it’s used to pay for education expenses.
• It’s used for qualified education expenses including tuition and fees, contributions to a qualified tuition program, or contributions to a Coverdell ESA.
• The bond is used to pay for expenses for yourself, a spouse, or an established dependent.

#Impact on Financial Aid

Both parent-owned and student-owned bonds, interest included, are reported on your FAFSA as investments under family assets, with the total student-owned bond value contributing 20% toward investments, and parent-owned bonds contributing 5.64%.

#Who a Savings Bond is Best for

Savings bonds can be a good way to reliably grow your savings over time in a way that’s less volatile than investments, with tax advantages on the growth. It can be a solid supplement to a standard 529 savings account that allows a bit more flexibility in cashing out.

Monarch Pro Tip: Monarch allows you to add bonds of either type to your assets, tracking growth and the interest rate through the U.S. Treasury website.

#High-Yield Savings Accounts

TL;DR: High-yield savings accounts (HYSAs) are savings accounts offered by banks and financial institutions with a higher interest rate than what traditional savings accounts offer, typically ranging from 3% to 5% APY. Cash is kept in liquid form instead of investments, making growth much slower but less volatile, and allowing for more flexibility with withdrawals and expenditures.

#Eligibility

Most adult citizens or residents can open up an HYSA account, with the option of joint ownership with a parent or guardian available for minor account-holders.

#Control

You have full control and access to your funds in the HYSA, and can withdraw them at any time. The interest rate you receive, however, is set by the bank, meaning that growth is fairly limited.

#Flexibility

You can use the funds from your HYSA for whatever you want or need, whether it’s tuition, books, supplies, groceries, or otherwise. The only limit is in the number of withdrawals you make per month, which may be capped at a certain amount by your bank or account provider.

To get around this, you can either have a lump sum transferred to a checking account every month, from which you can make as many withdrawals as you’d like, or use the account to pay off the balance of a card you use for charges.

#Contribution Limits

HYSAs don’t have any contribution limits.

#Taxes

While you don’t pay taxes on your deposits to or withdrawals from an HYSA, you will have to pay interest on any interest you accumulate.

#Impact on Financial Aid

Withdrawing from an HYSA doesn’t count as income. However, the funds in your HYSA do count toward you and your family’s assets on the FAFSA, which can limit how much financial aid you are eligible for.

#Who an HYSA is Best for

An HYSA can be a useful, flexible cash supplement to traditional college savings plans, allowing you to fill the gaps for college expenses that aren’t necessarily qualified for a savings withdrawal while earning a bit of interest in the interim. However, it shouldn’t be your first choice, as your funds will grow much more over time with an investment-based plan.

#How College Savings Accounts Affect Financial Aid

Savings accounts can impact your student aid index (SAI), which determines which needs-based scholarships, grants, and work studies you qualify for on your FAFSA. How great the impact is depends on the account type. In general, savings accounts can affect your SAI in two main ways:

• Family and student assets, which are the total amount of assets your family or you as an individual owns, including non-retirement savings accounts, bonds, investments, real estate, and other things of value.
• Income, which can come into play if you are taking distributions from a Roth IRA or a brokerage account to pay for college.

When calculating student aid, assets you own and income you make will generally be counted as a percentage against your potential aid. For example, if you have a UTMA with $10,000 in it, the FAFSA will count 20% of its balance, or $2,000, against any potential aid you may receive.

In general, student-owned assets generally count 20% against your SAI. Family-owned assets, however, will only count 5.64% against your SAI. Some account types also offer more protection against being counted as an asset; Roth IRAs, for example, don’t count, since they are a retirement account.

For comparison purposes, 22% to 47% of parent or student income is counted against the SAI, so while accounts can have some impact on aid eligibility, income has a much more significant effect.

Here’s a quick summary of how different accounts can impact your SAI.

Monarch Pro Tip: You can add other assets such as cars and real estate to your Monarch account, allowing you to track you and your family’s net worth and which assets you’ll have to report on your FAFSA.

#How to Choose the Right College Savings Account

Choosing the right way to save for college will depend on your individual circumstances, and which account type offers the most advantages to you.

In general, a 529 will be your best baseline savings account, as it offers the best way to invest with the most availability, highest contribution limits, best tax benefits, minimal impact to financial aid, and most flexibility in terms of what counts as educational costs. As such, many experts recommend using a 529 as a primary way to save for college, while using the other methods as a supplement.

However, if you’re planning to pay for most or all of the cost of college for a student, some experts recommend only using the 529 for about half of your savings, in order to give the student more flexibility in choosing their educational path. For example, a 529 plan would not consider expenses at most foreign universities to be qualified education expenses.

When choosing a college savings plan, consider the following factors:

• How much control you want over the investments. A Roth IRA or a Coverdell ESA offer more control over individual investment choices than a 529.
• Contribution limits. Many college savings plans like Coverdell ESAs have low annual contribution limits, capping how much you can save.
• Tax advantages. Coverdell ESAs and 529s offer more tax benefits than a UGMA/UTMA or an HYSA.
• Eligibility. 529s, Roths IRAs, HYSAs, and bonds are more accessible than a Coverdell ESA in terms of income requirements.
• Flexibility in fund usage. Some savings plans will only allow you to use your funds for educational expenses or tuition, with varying definitions of what counts as a qualified expense. Others will let you use the funds for whatever you want.
• Age of the student. Investment accounts work best when the student is young, since contributions have time to grow. Cash accounts or short-time fixed income investments may be a better idea if the student is close to college age.

If you’re unsure of which type of account to use, consider consulting a financial professional.

#Alternatives to Consider

If you want to explore other options for saving for college, there are a few other ways to invest. Consult with a financial professional if you’re considering one of these options, as they aren’t strictly meant for educational expenses and can come with fewer tax advantages.

#Brokerage Accounts

Brokerage accounts are a flexible way to save for college since you can use the funds for college or any other purpose. Anyone can open a brokerage account, and you, as the owner of the account, have complete control. The funds can be used for any purpose, and there’s no cap on contributions. However, they don’t offer the same tax advantages of a 529 plan. 

If you want to save for college in a flexible way (just in case you want to use the funds for a different purpose), brokerage accounts can be a great option. Or, if you are saving into a 529 plan but don’t want to risk overfunding a 529 plan, a brokerage account can be a great complement to a 529 plan. If you plan to use both a brokerage account and a 529 plan and you’re planning to invest over time, contribute to the 529 in the first several years so that you can maximize potential tax-free growth, and save into a brokerage account in later years.

#Life Insurance

Another option is to take out what’s known as a policy loan against a life insurance policy. If you have permanent life insurance, which is a life-long policy that lasts as long as you pay premiums, you may request to take out a loan against the policy. This can be used to borrow cash for any reason, so it’s not strictly limited to education costs. There’s no approval process, the repayment terms are flexible, and the balance can be paid off whenever you want to.

However, the balance will accumulate interest, and if it gets too high, then your insurance company may lapse the policy. As well, if the policy holder dies while there is a balance, then the loan balance will be deducted from the payout. Another thing to consider is the expenses of the policy itself – often these types of policies have high fees that can eat away at the value of the investments significantly over time. Since other methods tend to be more tax-advantaged and offer better growth, borrowing against life insurance shouldn’t be a first choice for paying for college.

#How Much Should You Save for College?

With college tuition having risen 36.8%, at an annual average rate of 3.88%, since 2010, according to the Education Data Initiative, keeping an eye on the cost of education is crucial whether you have a teenager or a newborn. Here’s a quick breakdown of some of the average college costs for the 2025 to 2026 academic year, according to College Board:

As such, you should use these numbers as a general guidepost to determine how much you should save as a baseline, adjusted for approximate inflation.

Monarch recommends contributing at least up to your state’s income tax-deductible limit to a 529, with the goal of contributing 50% of the total education cost to a 529 plan. The remaining 50% can be put in a brokerage account, which can give you a bit more flexibility in how you pay for educational expenses.

Keep in mind that there are multiple factors that go into determining how much you need to save, including:

• The school of choice. Each school will have its own tuition and fees, with in-state public schools being cheaper than out-of-state schools as a baseline.
• Financial aid available. Filling out your FAFSA each year will give you a good idea of how much aid you are eligible for based on income and familial assets. Many colleges provide calculators to determine an approximate aid estimate based on this.
• Scholarships. Merit and aid-based scholarships can make a decent dent in college costs, especially if you apply for many of them.
• Housing. Staying on-campus instead of commuting can be more expensive in the long run.
• Location. Attending an out-of-state school can not only be more expensive in terms of tuition, but also have additional costs for transport, purchasing new furniture and supplies, being in a high-cost-of-living area, and other needs than staying closer to home.

Keep in mind that if you end up saving too much for college, you have options with what to do with the leftover funds, including converting a 529 to a rollover IRA or changing the beneficiary to a sibling, which means that saving more than you need – so long as you’ve prioritized other goals, such as your emergency fund and retirement – can be advantageous.

#Tips for Maximizing Your College Savings

Saving for college is all about the long game. By staying motivated, having a direct end goal, and using digital tools such as Monarch, you can make saving a cinch and maximize how much you can save up and invest. Here’s how.

• Start early. The earlier you start, the more time your investments and interest will have to compound. Many accounts will allow you to start saving from the day a child is born.
• Make payments automatic. Putting your savings in the background keeps it a consistent and organic part of your budget.
• Have a goal in mind. Use a cost of college calculator to estimate how much college will cost by the time your child graduates, and get an idea of how much you’ll need to save.
• Encourage friends and family to contribute. Many families encourage a 529 contribution as a birthday or holiday gift. If grandparents open an account in the student’s name, it can be even better for financial aid eligibility purposes.
• Encourage your kids to save. Whether it’s money from birthday gifts or a summer job, encouraging your kids to save toward their own education will both help their savings grow and teach them the value of putting their money away.
• Put extra funds in savings. If you receive an unexpected windfall, and you’ve already maxed out your other savings goals (such as your emergency fund and retirement goals), consider putting it toward the kids’ college savings.
• See where you can cut college costs. Scholarships, living at home, and going to an in-state school or community college can all help you save on college costs and help your savings go further.
• Adjust as you go. As your child gets closer to college age, you can start narrowing down which school they’d like to attend, what career path they have in mind, and how tuition has changed, adjusting your goals as you go.

Monarch Pro Tip: You can set savings target for yourself with Monarch’s Save Up goals, which not only gives you a way to track your progress, but also integrates your savings with your monthly budget.

#Conclusion

Saving for college is an important goal, and choosing the right account can help you save on taxes and maintain the right level of control and flexibility. But keep in mind that if you don’t have a fully funded emergency fund, haven’t started saving for retirement, or you’re still working on paying off high interest debt, those goals are likely more important places to focus first.

No Content can or should be construed as professional advice of any kind (including financial planning, business, employment, investment, accounting, tax, and/or legal advice). The Content is provided for educational purposes only, and is not intended to be a substitute for the professional advice of a financial planner, financial advisor, accountant or otherwise.

#FAQs

What is the best type of college savings account?
While it is dependent on your family’s situation and financial needs, a 529 generally offers the most tax benefits, the most age-based portfolios, and the most flexible range of qualified educational expenses. While other account types may offer more flexibility in terms of withdrawals, they generally don’t have the same growth and contribution options available. Moreover, a 529 can be rolled over into an IRA account if you have any leftover funds, or switched to a sibling as beneficiary to pay for their school.

Can I use a Roth IRA to save for my child’s college?
You can, but it shouldn’t be your first option. A 529 offers many of the same tax benefits of a Roth IRA and can come with tax credits depending on the state, along with investment options and methods better suited for a college savings timeline. If you do have a Roth IRA you want to use for college, make sure you use your withdrawals for qualified educational expenses only, or risk paying the early withdrawal penalty.

How much should I save per month for my child's college education?
That will depend on your overall savings goals based on the future cost of college. For example, a child graduating in 2044 could be projected to pay $200,000 based on current tuition rates and increases for a public, four-year school. This means, with a 529 account with a 6% rate of return, you’d want to save at least $134 each month for 18 years if you want to save 50% of the total cost of college. Using a college savings calculator can help you get a handle on how much you’ll need to save based on your account type.

When should I start saving for my child's college education?
While you can start saving at any time, beginning at the birth of your child or beneficiary is a good starting point. The earlier you save and invest, the more time it has to grow.

Can I have multiple college savings accounts?
You can, both among siblings and in general. For example, if you have three children, you can have a 529 for each of them, a Roth IRA for each of them, and multiple HYSAs, bonds, and brokerage accounts. This can be a good way to diversify your savings as well. Keep in mind that generally you can have only one education investment account type for each child, and that contribution caps may count toward an overall pool even if the individual has multiple accounts (such as in the case of a Roth IRA.)

What if my child doesn’t go to college?
College savings accounts don’t strictly have to be used for college, and can instead be used for accredited trade schools, technical/vocational programs, and apprenticeships, depending on the account types. There are a few other ways you can use the funds without incurring a withdrawal penalty, depending on the account type.

• 529s can be rolled over to a Roth IRA or transferred to a sibling.
• UGMA/UTMAs can be used as cash accounts once the beneficiary turns 18.
• Coverdell ESAs can be rolled over into a 529 or transferred to a family member under 30.
• Roth IRAs can be used for retirement upon age 59½.
• Prepaid tuition plans can be rolled over into a Roth IRA or transferred to a sibling.
• Savings bonds can be cashed out as-is, though you’ll pay a tax on the interest.
• HYSA balances can be withdrawn at any point and used as cash.