How Much Do I Need To Save For College Calculator

Do Most Parents Pay For College

On average, parents contribute almost three-quarters of those funds , while 13% of the total cost of college is the students responsibility. Parental income is the predominant source of money set aside for college, used to pay for more than half of a students attendance cost.

Every Family Has Different Savings Goals

Our 2K rule of thumb is an easy way to see whether you are on track, especially if your children are still young and you are not sure where they will ultimately choose to go to college, says Andrey Lyalko, a vice president at Fidelity. Because this approach may not apply to all situations, make sure to develop a robust college savings plan and be mindful that college costs are a variable that can dramatically change over time.

So what if your situation differs from the norm? Perhaps you are hoping for a sports scholarship for your aspiring student athlete. Or maybe you are looking to cover 100% of college costs and are not expecting any scholarships or grants. You may also believe that your child will go to a private college, where the costs could be substantially more than the average public university.

The college savings math can still work for you:

When Should You Start Saving For College

As soon as possible! Thats if youve already taken care of Baby Steps 14.

Starting a college fund is a great goal, but its not the only goal. You need to pay off debt, have an emergency fund, and start saving for retirement before you jump into saving for college. There are other ways to pay for college too, like using grants and scholarships. Bottom line, you need to take care of your future first, then you can bless your kids. Its not selfish. Its smart.

If youre following the Baby Steps, you know that saving for college is Baby Step 5. That means there are four other steps you need to take before you even think about Juniors college education:

• Baby Step 1: Save $1,000 for your starter emergency fund.
• Baby Step 2: Pay off all debt using the debt snowball.
• Baby Step 3: Save 36 months of expenses in a fully funded emergency fund.
• Baby Step 4: Invest 15% of your household income in retirement or a Roth IRA).

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If You Have More Than One Child

The EFC formula takes into account both the size of your household and the number of children you have in college at one time, so you’ll probably be expected to pay less per child.

You may also expect to need less for one of your children if he or she plans to go to a lower-cost school or is likely to get merit-based aid.

Run the numbers for each of your children separately. If it turns out that you won’t be able to cover your target percentage for all your children, adjust your plan accordingly.

How Much You Really Need To Save In A 529 Plan

Part 2 of that “scary” number that you need to save each month for your child’s college is that number is based on saving 100% of their college costs. As a parent, you don’t need to pay for 100% of their school. Or, maybe you’ll pay for 100% of their public in-state tuition, and the rest is up to them. Or maybe you’ll just have a target savings number, and the rest is up to them.

It’s simply important to remember that you don’t have to save and pay for all their college. It’s THEIR college – not yours. Plus, there are tons of ways for them to find help paying for school, from finding scholarships, to getting student loans.

So, instead of stressing out about saving $500 per month, I’m going to make the following assumptions and save based on that:

• I’m going to save for an in-state college that currently costs $10,200 per year
• I will contribute to all 4 years of college
• I will pay 50% of the projected college costs
• I’m done contributing to the 529 plan when my child is 18
• I expect college costs to continue to increase by 4% per year
• I expect to get 6% per year return on my investments in my 529 plan

With these assumptions, you should be saving about $96 per month for your child’s college, or $1,151 per year. Let’s see how that breaks down.

However, if you’re on the high end, and want to contribute to pay 100% of your child’s education expenses at a 4 year private college, I included that in the chart below too .

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How Much To Save For College

Unless your familys income is at the very top of the national average, your child likely wont have to cover the full published cost of attendance. In 2017-18, 86% of full-time first-year undergrads at four-year schools received some type of financial aid, according to the National Center for Education Statistics.

The average net price of a college is a more reasonable way to estimate how much to save. The net price is how much a student pays after taking into account any grant aid, which doesnt need to be repaid. The federal, state and school grant money your child is eligible for is determined using the information in the Free Application for Federal Student Aid and any state- or school-specific financial aid applications.

The grant aid your child receives will depend on your familys financial circumstances when you fill out these forms. Your income, the number of children you have in college at the same time and certain types of assets will all factor in. But you can use average net price numbers to set your savings goal.

Here is the average net cost of attendanceincluding tuition, fees, room, board, books, supplies and transportationfor full-time students across different college types, according to The College Board:

Where To Open A 529 Plan

What many people don’t realize is that you can invest in almost any state 529 plan. For some people, it can make sense to use your own state’s plan to take advantage of the tax deduction – but not all states offer tax deductions on contributions .

If the state doesn’t matter, the next things to look at are performance and ease of saving. For performance, you want good performance for low fees. For ease of savings, we look at whether the plan can be connected to savings programs like College Backer.

Check out this guide here, find your state, and see what plan we recommend: 529 Plan Guide.

SavingForCollege.com ranks the best plans every year. What plan you choose depends on the state you’re in. Check out the map below and find your state:

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Potential 529 State Tax Benefits

Some states offer a tax deduction for contributions to a 529 plan, which could further increase projected college savings if tax benefits are invested. Read more about state tax benefits for 529 plans, and estimate your state tax savings with our Tax 529 Calculator.

The amount of scholarships and grants the student can expect to receive is based on your household income.

Maximum assumed rate of return is 12%.

The amount of scholarships and grants the student can expect to receive is based on your household income.

Also called “sticker price”, this is the projected future cost including tuition, room & board, books and fees.

Costs not covered by savings will need to be paid in the form of current income, friends/family contributions or student loans.

This is the average amount of money a family typically receives in financial assistance.

Based on your monthly contribution, this is how much you’re expected to save in a 529 college savings plan.

According to the Department of Education, most students take five years or more to earn a bachelors degree.

How Much Do I Need To Save For College

With college costs increasing at twice the rate of inflation, it is important to start saving early. Interest working for you now in a regular savings program is much better than having interest work against you in the future in the form of education loans. Use our college savings calculator to determine how much you should be saving for college on a regular basis.

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Assumed Annual Return At 5%*

*This hypothetical example illustrates the accumulation potential with a $2,500 initial investment and a monthly contribution plan at a 5% projected average annual return. The above example is based on projections and does not reflect your actual investment in the Bright Start Direct-Sold College Savings Program. If fees were included, the returns would be lower. Your actual results may be more or less.back

The Bright Start Direct-Sold College Savings Program is sponsored by the State of Illinois and administered by the Illinois State Treasurer, as Trustee. Union Bank & Trust Company serves as Program Manager. Investments in the Bright Start Direct-Sold College Savings Program are not guaranteed or insured by the State of Illinois, the Illinois State Treasurer, Union Bank & Trust Company, the Federal Deposit Insurance Corporation, or any other entity.

An investor should consider the investment objectives, risks, and charges and expenses before investing. This and other important information is contained in the Bright Start Direct-Sold College SavingsProgram Disclosure Statement which can be obtained at BrightStart.com and should be read carefully before investing. You can lose money by investing in a portfolio. Each of the portfolios involves investment risks, which are described in the Program Disclosure Statement.

Not FDIC Insured | No Bank Guarantee |May Lose Value

The Best Way To Start Saving For College

9 Minute Read | September 27, 2021

How much student loan debt do you think the average college student racks up by the time they cross the graduation stage? $5,000? $10,000? Think again. The average college graduates student loan debt is a whopping $37,693.1 And thats just the average!

The overall student loan debt in America is nearly $1.6 trillion.2Trillion!

At this rate, college graduates will be lucky to have their student loans paid off before their kids start college. As a parent, youre probably thinking there has to be a better way. Well, there is! You can start saving for college by opening a college fund. Its not easy, but with focused dedication, hard work and careful planning, its possible to save enough so your child can go through college debt-free.

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College Savings Plan Guidelines

From the results, we can conclude that the goal for most people saving for college should be to have between $37,328 and $245,427 saved in the account. This is a huge range, no doubt. But remember what “low end” and “high end” mean.

The low end amount is for someone that wants to help their child pay for a public 4-year school. The high end amount is for someone that wants to fully pay for a 4-year private education for their child.

Parents should also remember that, even when saving for private school, many students who attend private schools get discounted tuition, or receive scholarships to offset the “real” tuition price. So, even that high end number might not make sense when saving for college.

In this scenario, the low end 529 plan will be able to pay out between $9,600 and $10,000 per year, for each of the 4 years of school. Given that the college costs will rise, that should be about 50% of a 4-year public school tuition in 18 years.

Funding Education With A 529 College Savings Plan

One way to approach your college education funding is to open a 529 college savings plan. Why is it called a 529? These plans are named after section 529 of the Internal Revenue Code and offer you some important tax advantages. First, your investment in a 529 plan grows tax-deferred and provides the student beneficiary with tax-free educational use of the money for qualifying expenses, which include tuition and fees, room and board, books and supplies. While you are not allowed to deduct 529 plan contributions from your federal income tax, some states permit deductions of all or some percentage of your contributions from your state income tax.When setting up a 529 plan, you can choose either a prepaid tuition plan or an education savings plan. With a prepaid tuition plan, you as the account owner purchase credits for a specific participating college at todays prices to apply toward tuition costs in the future. This kind of plan gets around having to worry about rising inflation. Alternatively, an education savings plan gives you more flexibility. These funds can be used for a variety of qualified educational expenses at any university or college your student decides to attend.Here are some additional 529 plan features:

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Next Calculate An Amount Based On Your Target

Our college savings planner makes it easy to see how much you’ll need to save per month in order to meet the goal you’ve set.

The college savings planner assumes that you’ll earn a specific rate of return on your college savings. So once you know which asset mix you’ll be investing in, you may want to come back and adjust your return expectations.

If the planner’s recommended contributions seem high for you, figure out whether you’ll be able to use some of your income to pay for college while your child is attending. If so, this amount can be deducted from what you’ll need to save.

Typically, the biggest way parents contribute to college costs is by using their current income. In 2014, parents used an average of $6,973 of their income to pay for college.

How Much Do You Need To Save For College

The answer to this question depends on several factors including the number of children you have, how much you plan to fund their higher education costs and ultimately where they decide to enroll for college . Obviously, the more children you have, the more you may need to save. If you have three or four kids, having a solid college savings plan can be helpful. Our College Savings Calculator allows you to estimate your college funding needs for up to six children. You may decide not to fund 100% of your childs college education. You may want your child to assume part of this financial responsibility by getting a job or an education loan to help pay for college. However, student loans can create years of financial stress for graduates as they repay this debt which is why many students have a game plan of zero student debt these days. There are alternatives to student loans to consider as well, including grants, scholarships and work-study programs.

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When Will Your Child Attend College And For How Long

Despite the growing interest in gap-year programs, our model assumes that students will attend college beginning at age 18 and graduate in a 4-year period. We assume that college costs continue to grow at 3% above inflation from now through the projected graduation date.

Our rule of thumb suggests a savings target of approximately $2,000 multiplied by your childs current age, assuming attendance at a 4-year public college , and your family aims to cover approximately 50% of college costs from savings. Remember, this rule of thumb is only a starting point to help you estimate your college savings goal and may change over time and based on your particular situation.

Simple College Savings Tips For Students

College is a privilege. Sure, most of us want our kids to pursue a degree, but that doesnt mean its our responsibility to pay for it. Its totally okay for them to take some ownership in their education. Even though your child is a full-time student, theres no reason they cant start building up their own savings fund. At the very least, doing this will help establish healthy money habits theyll carry into the future.

Here are some great college savings tips to help them get started:

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Look For Other Ways To Meet College Costs

There are other options to consider if you have a savings shortfall and are unable to increase the contribution amount to your college savings account.

Invest monetary gifts. Using money from holiday and birthday gifts to fund a college savings account can make a meaningful difference.

Explore grants and scholarships.These awards are offered by federal, state and local governments, private and nonprofit organizations and most colleges. The best part grants and scholarships, in general, do not need to be paid back.

Research student loans. Student loans are offered by federal and most state governments and from private institutions, as well. Of course, student loans must be paid back along with any interest incurred.

Take advantage of your local community college. Beginning at a local community college before transferring to a university can reduce overall costs and provide access to an education that might otherwise be out of reach.

Contemplate other colleges. Run scenarios in our College Calculator using different schools to find other options that are a good fit for your family.

* Largest by assets, according to the Q4 2018 529 College Savings Quarterly Data Update from Strategic Insight. Source: American Funds. As of September 30, 2018, CollegeAmerica AUM is over $60B.

Visit for more information about college savings strategies, The CollegeAmerica 529 savings plans and American Funds College Target Date Series.