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How to save your stimulus money for your middle schooler’s college fund

As the years have gone by, you might have wondered how to save for college. Sure, most of us aim to plan for that when kids are younger, but before you know it, your son or daughter is in middle school. But instead of panicking about the timing, take heart — it’s not too late to build that nest egg for them. In fact, that stimulus check you just got is a great way to start. Here, we take a look at ways to save for your kid’s college fund. As you look at these options, you might consider crunching numbers to figure out approximately how much you’ll need to save. Also, you might benefit from consulting with a financial advisor to find out an approximate figure each option will yield by the time your child reaches 18.

calculator, money, notepad
Karolina Grabowska

ESA or Education IRA

Working with a brokerage company or any other financial institution, you can set up an education savings account (ESA) right away with your stimulus payout. However, you can only contribute up to $2,000; plus, the account would have to be in your child’s name. Nonetheless, you and your spouse can contribute any time during the year as long as you don’t go past the limit.

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And that’s the catch. The other caveats involve falling within a certain income bracket in order to qualify for this option and exhausting the funds by the time your child turns 30 years old. Nonetheless, there is a bit of good news — the growth is tax-free!

529 plan

If you’re looking for a higher yield on your investment with tax-free growth, then the 529 presents a viable option. There are three types of 529s to choose from:

  • Savings that work in a manner similar to that of a 401K
  • Prepaid that operates like a pension and is often restricted to state residents and/or in-state colleges
  • A combination of both that is literally one of each of the previously mentioned options

You can work with a financial advisor or research on your own on sites like Once you’ve determined which route you prefer, you would provide your personal information along with that of the beneficiary — your child. This includes dates of birth and social security numbers. You will also need to name a successor account owner to avoid any legal issues in the event of death or divorce.

From there, you would open the account and select your investments. Low to medium risk might be the best bet if you’re not working with a financial advisor. Otherwise, you can also choose age-based portfolio that corresponds with the age of your beneficiary. At this point, you’re ready to submit your application and deposit the funds.


Another option to consider when figuring out how to save for college is the Uniform Transfer/Gift to Minors Act (UTMA/UGMA). The one big difference between an UTMA, 529, and ESA is that you don’t have to use the funds just for college. They can be applied to tuition at a trade school, cosmetology college, or any other post-secondary training. Another benefit is if you have this plan and another savings account, then this one can be used for child’s class fees, books, and even living expenses.

To begin with, you would open the account in your child’s name, but you would be the custodian until your son or daughter turns 21. (The age is 18 for the UGMA.) At that time, he or she would gain control over the account.


A certificate of deposit or CD is another choice that might require some shopping around to find the highest interest rate. Basically, once you make your deposit, the funds stay in the CD for a set period of time. The term can be a few months or even 10 years, depending on what your goal is. When your term ends, you can choose one of two options:

  • Roll the amount into another CD or a Roth IRA
  • Withdraw the deposit along with interest earned

To acquire a CD, you can either go to an online or a brick-and-mortar bank.

four graduates in caps and gowns
Tony Meyers

Final takeaway about how to save for college

As you can see, the amount of stimulus money that you receive would be a good start. Establishing a college fund, even if your child is already in middle school, will pay off (no pun intended) in the long term rather than starting at zero during his or her senior year. Once you decided specifically how to save for college, you can also set an automatic draft from your account for contributions, encourage your child to take part by putting away a couple of dollars from allowance and gifts, and, of course, start familiarizing yourself with the financial aid application system. In due time, you’ll find yourself financially prepared for your high school graduate to set out and achieve his or her dreams.

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