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How to Start Saving for Your Child's Education

By: American Heritage04.04.24

If you’re a parent, you want what’s best for your child, like making sure that they get a good education. But how do you pay for daycare and start saving for tuition without going broke?

The good news is that there are options to help you financially plan for your child's future that allow you to save money in the short-term and long-term, provide tax savings and earn investment income for the future. 


Build Savings with the Right Tools


1. Dependent Care FSA

Dependent Care Flexible Spending Account (DCFSA) is a benefit account that you can get through your employer that can be used to pay for eligible dependent care services, such as preschool, summer day camp, before or after school programs, and daycare.

The benefits of a DCFSA is that the money you contribute is not subject to payroll taxes. So, you end up paying less in taxes and can take home more of your paycheck.

If you’re able to take advantage of a DCFSA remember the following:

  • Don’t set aside more than you need because the funds in the account at the end of the year will be forfeited.
  • Keep good records, because you must submit reimbursement requests to get the money back.
  • Each spouse can contribute to an DCFSA account, but total family contributions cannot exceed $5,000.
  • In addition, if you’re enrolling because a baby is on the way, you don’t have to wait until open enrollment which usually happens in October through November. For a “life changing event” you have 30 days after the baby’s birth to enroll, though it’s probably a good idea to start saving as soon as you know you’re expecting.


2. Child Care Tax Credit

If your employer doesn’t offer a flexible spending account, you can always take advantage of the child care tax credit on your income tax return. This allows you to itemize up to $3,000 in expenses per child per year, with a $6,000 annual cap per family. Once you’ve itemized the expenses, you can take a percentage of that and apply the tax credit.

Keep in mind, if you use an FSA, any FSA money is applied to the tax credit cap first. So, if you use $5,000 from an FSA, you can then itemize only $1,000 for the child care tax credit.


3. PA 529 plan

You can start an educational savings plan today with a PA 529 plan if you plan for your child to attend a higher education institution. 

The PA 529 Guaranteed Savings Plan is an investment account that lets you save for tomorrow’s college expenses at today’s rates. A 529 plan allows you to invest after-tax money into the plan, then you’re able to withdraw the funds (and any investment gains) tax-free for use toward qualified education expenses, such as college tuition.

While you could use this money towards any school, this plan is very effective if your child goes to a Pennsylvania state school. If you save enough for a semester at one of the state universities today, you’ll have enough for a semester at that school in the future – no matter when or how much tuition has gone up in the meantime.

Another benefit of a 529 plan is that anyone can contribute. Grandparents, friends, and family can all make direct donations into the plan that will also collect interest over time.

You can open a 529 account at American Heritage Credit Union’s Income and Retirement Center. Participants would need to provide a name, address, date-of-birth, and social security number to open the fund. Programs such as and Gift of College provide a portal that you can use to encourage your loved ones to donate directly to your child’s 529 plan. 


4. Upromise

Want to shop your way to college savings? With a Upromise account, you can earn cash back for college on shopping and dining. You earn money by registering your credit cards, loyalty cards, and grocery cards, and then receive cash back on eligible purchases.

Money earned through the program will be deposited to a 529 college savings account or to existing student loans.


5. Roth IRA

Many people know about a Roth IRA as an individual retirement account. Essentially, with a Roth IRA, you put in after-tax money, which then grows tax-free. While your contributions are nondeductible, you can withdraw your funds after age 59½ tax-free.

However, while a Roth IRA is intended to be a retirement savings vehicle, it can also be used for college savings. This is because contributions can be withdrawn tax and penalty-free to pay for college, even if they’re withdrawn before you turn 59 ½.


6. Your local credit union

American Heritage Credit Union offers a variety of specialized youth accounts to start your child’s savings account today. Looking for more resources? Credit union education is at the heart of what we do here at the credit union. We offer a multitude of free financial education resources such as Zogo to help you with your family financial planning. 


More Saving Tips

One of the most defining moments in a teen's life is choosing a vocation. Higher education opens many doors and is often the only choice for careers that require a specialized degree or training. Fortunately, there are plenty of ways to tackle the cost of higher education in addition to student loans!

Remember the actions you can take to help make higher education more affordable:



It is important to practice good personal finance habits before setting foot on a college campus. A monthly budgeting worksheet or smartphone app will make tracking income and expenses a breeze. Budgeting is a valuable skill used for an entire lifetime. With basic mathematical problem solving and financial education you can take control of your finances and be your own personal accountant.

Budgeting basics:

  • Track income sources and know the average amount of money brought in each month
  • Track recurring expenses like bills or subscriptions
  • Track other expenses like purchases, grocery spending, and other variables
  • Have an emergency fund and plan for unexpected events
  • Put aside a designated amount of money each month to build savings



Save by buying secondhand! Some textbooks, supplies, and even dorm room essentials can be purchased gently-used for a discount. Mini-fridges, microwaves, and storage furniture are all popular items leftover in high supply at the end of each school year.

Whether living in a dorm or commuting from off campus, students may experience a lot of newfound freedom — and responsibility.

Save more by shopping smart and making these lifestyle changes:



American Heritage annually awards high school seniors a $1,000 scholarship to ease the financial burden of higher education expenses. American Heritage Credit Union’s Scholarship Committee selects the scholarship beneficiaries based on their grades, community involvement, school participation, a letter of recommendation, and a submitted essay.

Eligibility requirements for graduating high school seniors include:

  • Minimum GPA of 2.5 on transcript
  • Have been formally accepted into an accredited two- or four-year college, university, trade, technical or business school
  • Be a member in good standing of American Heritage for at least one year
  • Cannot be an employee or family member of an American Heritage employee

The application period is open in late winter to early spring. Students interested in applying can click here to read the full list of submission materials and eligibility requirements. We encourage all eligible students to apply!



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