Every family’s situation is different. Here are three things to consider as you plan for your child’s future.
1 How much will college cost when your kid is ready?
Currently, the average cost of college (which includes tuition and fees and room and board) for four years is $90,760 for an in-state student at a public school, $158,040 for an out-of-state student at a public school, and $207,840 for a private school. If your child is still in diapers, expect those figures to climb by at least 2% to 3% a year.1
The good news: No one is expecting you to save that much. For starters, slice those figures in half. Parental savings and borrowing averages 54% of costs, student income and borrowing account for 19%, and scholarships and grants typically cover 25%.2 Here’s a tip: Millions of dollars in scholarships go unawarded every year.3 If your child is entering high school, start searching for scholarships now. There are dozens of websites that can help you find appropriate awards.
2 How many years will your child be in school?
Most parents budget for the traditional four years of college, but only 44% of graduates got through their degree programs in four years or less. Another 30% took between five and six years.4 The most common reasons why it takes longer: Students are changing majors, changing schools, and/or working to pay down their loans. Should you prepare to financially help your child for five years, six years, or more?
3 How much can you afford to save?
College costs a lot, but remember, you don’t have to foot the whole bill. Start small—even if you set aside $25 or $50 a month—and start as soon as possible. As you can see below, even $50 a month can add up over time.
Growth of $50 a month
Source: SavingsCalculator.org, May 2022. Assumes 6% interest, paid annually. This hypothetical illustration is for educational purposes only and does not depict any specific investment. Rates are subject to change. This illustration does not reflect the effect of any charges or fees. These fees would reduce the performance shown in the above illustration.
You should set up a specified account for your child, such as a savings account or a 529 education savings plan. You can always change your contribution amount as your resources increase or decrease.
Before making any decisions, be sure to meet with your financial professional, who can help you put together a plan to save that fits your budget.
1 “Trends in College Pricing and Student Aid 2021,” College Board, August 2021. 2 “How America Pays for College 2021,” Sallie Mae, 2021. 3 National Scholarship Providers Association, November 2021. 4 “Fast Facts: Time to degree,” National Center for Education Statistics, 2022.
This material does not constitute financial, tax, legal, or accounting advice, is for informational purposes only, and is not meant as investment advice. Please consult your tax or financial professional before making any decision.
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