Nate and Danielle answer a listener email question about affording college and what to look for when coming up with a college plan for your children.
Would love to hear what you suggest is a good number to save for each child’s education. Or are you trying to reach a certain percentage of college costs (thinking that there may be scholarships/grant money coming).
We invest in Maryland’s 529 plan. We live in the state and it has good options for us. You are able to invest in other state’s 529 plans, but it’s pretty typical to put money into your home state’s 529.
We have one child who is 3.5 and we have had a 529 plan opened for him since his first month alive. Our plan is to fully cover his tuition, a gift that both of us received from our parents, and not rely on possible grants or scholarships.
Our goal is to cover $20K a year or so in coverage. This should cover a 4 year, in-state college.
To find what we needed to save we used a few online calculators and averaged the costs. We came out to $250 a month in savings. This will generate a little over $100K in our son’s college savings account.
The total expected cost of his college, according to the calculators is somewhere between $175-$200K. That’s assuming that there is no change to how college is funded in this country.
We are both of the belief that college costs cannot continue to rise the way that they have over the past decade or two. If that doesn’t happen we will be short of our 100% goal by roughly $100K. That’s scary. We plan on having our house paid off by that time and we could cash flow the rest of his college if necessary.
We are considering upping our contribution.
Saving for college is not about a specific number, but more about goals. If your goal is to save for 100% then you have different goals than someone planning for 50% or less.
Go into the calculators, run the numbers, and test. See what works for you and your family.
Some other suggestions:
- Once they get out of diapers put the money that used to go to that towards college
- You are not stuck at a fixed number each month. As income or needs change, you can adjust
- Consider how far colleges are from you. If your child can live from home you can save a boatload (no room and board)
- Know your capacity for risk