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[Video] Spending Down the Funds You’ve Saved for College

by Financial Design Studio, Inc. / August 9, 2018


Now that you’ve saved for college you’re likely thinking which funds do I use first?  You may have money saved in a variety of accounts. Let’s discuss a great order of how to spend the funds down.

  1. Scholarships/Grants: Monetary awards that you get from your school or for academic purposes.
  2. 529 Prepaid Tuition Credits: College Expenses you’ve paid for in the past.  There’s a benefit when these are used for college costs.
  3. 529 Savings Plan: The account you’ve made contributions into where the funds are tax free when used for college costs.
  4. FAFSA student loan: Apply to see what you are eligible for
  5. Custodial Account: A savings account for your children where there isn’t a tax benefit when used for college.
  6. Cash Flow: If you’ve exhausted all of the savings you’ve built up now you can use your income to pay for the college expenses as they come.

There are a few different factors that could change the order we mentioned here related to the money you’ve saved for college:

  • How many children you have: maybe one child will use the funds saved for another, if the first child isn’t going to college
  • Income: If you don’t have the income to cover costs as they come then you really need to plan ahead.
  • Cost of College:  Depending on the cost of where your child is attending you may need to use one or more of the above strategies to fund their expenses.

Be sure to use the accounts that give you a tax benefit, but also understand that depending on your situation, the order could be changed for spending the money you’ve saved for college!

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Financial Design Studio, Inc.

We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.