How much should you be saving for college?
People are always telling parents to put away money for their children’s college education, especially with the cost of college rising so quickly over the past two decades.
But it’s not always easy.
Between the mortgage, car payments, and other expenses, many parents find it nearly impossible to save money for college. And most aren’t even sure how much to save, especially when they’re trying to save for retirement at the same time.
Preparing for high college costs
On average, parents begin setting money aside when their child is about 6, and the average college savings account contained $15,346 in 2014, according to How America Saves for College.
While this may seem like a healthy amount, keep in mind that 4 years at the average private school could cost your family nearly $170,000 when tuition, fees, room and board are taken into account. And with college costs rising every year, that amount might be even higher in a decade.
Experts say there’s there’s no ‘correct’ amount to save for college–it really depends on your family can afford in the context of other expenses, as well as your personal parenting philosophies.
Find your college savings ‘sweet spot’
In order to figure out how much to save for college, experts advise finding your “savings sweet spot,” by weighing what you consider to be your obligation to your child with what you can realistically afford.
You also have to consider factors such as whether you’ll qualify for much aid based on your income, whether your child has a chance at getting a scholarship, and how much student loan debt you expect your child to graduate with.
First, determine how much you want to put toward your child’s college based on average costs. Once you have a number in mind, you can use this savings calculator to determine how much money to put aside each month.
If you’re figuring out how to save for college, consider the benefits of a 529 plan, which can help you set aside income for your child’s college education. With a 529 plan, your investment grows tax-deferred, and you do not pay taxes on the amount when you take money out to pay for college.
Other options for saving for college include prepaid tuition plans, Coverdell Education Savings Accounts or even Roth IRAs.
Reduce college costs to maximize savings
Of course, most families don’t pay the full price of a college education out of pocket.
Most qualify for some kind of financial aid, which can include grants, loans, and work-study. And attending a community college or public school can lower your college costs significantly.
Even if you make the effort to save a good amount of college, reducing your college costs is always a good plan. For help finding affordable college options and maximizing your financial aid, give us a call at 1-888-234-3907 or contact us using this form.