Paying for college is an ambitious undertaking, and it's something many parents aren't able to do. But if you're hoping to one day finance an education, you'll need to know whether you're on track. Thankfully, this tool will show you how much to save for college each month to tackle those hefty tuition bills.
How much will college cost you?
With college costs rising faster than inflation, it can be tricky to establish a savings target if your children are young and college is a decade or more away. But if your kids are already at the point where they're studying for their SATs, then you can use last year's data as a reasonable baseline.
Here's what tuition looked like, on average, for the 2015-2016 school year:
- $9,410 for a public four-year in-state college
- $23,893 for a public four-year out-of-state school
- $32,405 for a private nonprofit four-year college
Of course, for some students, tuition is only part of the equation. If your children intend to dorm, expect your costs to rise by a good $10,000 per year. Here's what it cost, on average, to pay for tuition, fees, and room and board during the 2015-2016 school year:
- $19,548 for a public four-year in-state college
- $34,031 for a public four-year out-of-state college
- $43,921 for a private nonprofit four-year college
How do your savings stack up?
Now that you have some data to work with, you can use the following calculator to see how well you're doing on the college savings front:
As you'll see, this calculator lets you input your children's ages, their anticipated college costs, and the amount you've saved thus far. That data, coupled with assumptions about inflation and returns on your current savings, is used to determine how much you'll need in total, and the amount of monthly savings it'll take, to meet your goals in time.
Keep in mind that the figures this calculator spits back are just rough estimates. Your child might receive a grant or scholarship, which would lower the amount you'd need to pay yourself. On the flip side, your child might switch majors and prolong college by a semester or two, adding to your costs. But as a starting point, this calculator should give you a decent sense of what it will take to pay for college.
Some college savings tips
If you've input your data and are seeing some shocking numbers on your screen, then you're not alone. The average family currently has about $16,380 saved for college, which, based on the information above, isn't even enough to cover a year of in-state college for a student who plans to dorm. That's why it's sometimes best to take the "every little bit helps" approach when saving for college. Still, there are steps you can take to make the most of whatever money you do save, such as these:
- Open a 529 plan. Most regular savings accounts these days pay a meager 1% interest. With a 529 plan, you might see a 5% or 6% return even when you consider the fees you'll pay to invest. Furthermore, the money you put into a 529 can grow on a tax-free basis, and as long as you use that money to pay for qualified college expenses, you won't be taxed on your earnings when you take withdrawals.
- Save early on. The more time you give your money to grow, the more you'll be able to take advantage of compounding. If you get a bonus at work, or inherit some money when your kids are young, then stick that cash into a college savings account rather than spending it on something else. Imagine you receive a $10,000 lump sum when your child is 3 years old. If you invest that money right away and manage to generate an average annual 6% return, you'll have $24,000 by the time he or she turns 18 without having to put in another dime. On the other hand, if you invest that money five years later, you'll have just $18,000 by the time your child is ready for college.
- Take the less expensive road to an education. Choosing a public in-state college over a private one can save you a good $23,000 per year on tuition alone. Unless there's a truly compelling reason for your child to attend a private college, you're better off steering him or her toward a more affordable option. Similarly, having your child commute rather than dorm can easily knock $10,000 a year off your total price tag. You can bribe your child with a used car as compensation and still come out ahead.
Saving for college takes hard work and a ton of effort. The good news? If you save efficiently and encourage your child to make smart choices, there's a good chance those college bills won't be quite as daunting when the time comes to start writing out checks.