College Costs How Much?!

Most parents agree that a major goal in their life is to see their child attend and graduate from a good college in order to go on to be successful and happy with a great job. However, with how the economy is these days, college tuition for your kids is an extremely scary thought.  And I know what some of you are thinking, my kid is only 2 or 3 so why in the world would I start worrying myself sick about their college which is so many years away? Because starting to save now is the key!

How Much Should You Really Save?

From the day your child is born you will have approximately 18 years to save enough money to pay for their college tuition and other costs associated with them attending such as room and board, books, and such. Historically college costs have inflated at a rate of 5-8% annually, and the average return on investment will be about 7% annually according to historical returns on the S&P 500. While this may sound a bit overwhelming, the best advice is start saving early in order to be successful.

It’s Going to Cost HOW MUCH?

There is a great website that you can use to estimate how much college is going to cost based on the type of University, the number of years that your child plans to attend, and in how many years your child will be attending. The website is apps.collegeboard.com/fincalc/college_cost.jsp. The calculator gives you the ability to figure out how much money you need to be saving monthly to pay for the cost of your child’s college.

The figure you get will probably seem scary, but you also have to assume that your wages will increase along with the inflation of money, and rarely does a student have to pay the full “sticker price” of college. The following is a reasonable example.

With the five percent inflation figure, planned attendance of four years, and 18 years until college,the total cost of your child’s complete education will be $201,108.

If you were to start saving the day that your child was born, and you assume an 8% return on investment, you would need to save $418.90 a month. With an assumed 6% return on investment your monthly savings would need to be $519.19.

However, if you wait until your child is 10 years old to start saving (leaving you only eight more years) then the amount of money you’d need monthly would drastically increase. With an 8% return on investment, you’d need to save $922.27 per month. With a 6% return on investment that number would increase to $1005.17/month.

What does this tell you? START SAVING EARLY! If you’re starting late it doesn’t mean that you’re doomed, it just means you have a long road ahead of you. But those with young children can save a lot of stress later by starting that college savings account now!  The key takeaway from this is that the earlier you start saving for your child’s education, the better off and more debt free they will be in their adult lives.

Don’t let this be you, start saving now!

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