How Much Do You Need to Save for College?

by Miranda Marquit · 15 comments

My 11-year-old son has started thinking about college. Right now, he claims that he’ll either stay here, and wear the white and blue of the Utah State Aggies, or that he’ll head down south to SUU, in the town he was born — and where his father and I met.

If he decided to go through with those plans, it would be great. We’ve got a 529 plan going for him, and neither of those schools is expensive. Plus, since we’re connected with both of them, he’s eligible for legacy discounts.

The reality, though, is that he’s 11 years old, and still thinks his parents are kind of awesome. I suspect things will change in the next couple of years as he considers what he really wants to do, and he may decide that going to one of his parents’ alma maters isn’t the way to go.

With all these factors up in the air, how do you figure out what to save for college?

Ask Yourself These Questions

According to the 2013 Fidelity College Savings Indicator Study, saving for college is at an all-time high, with 69 percent of families reporting that they’ve started saving.

Here are some questions that will help you decide how much you should be setting aside:

  • Does your child expect to attend a private college or a public college?
  • Have you looked at the estimated costs associated with different types of universities?
  • Will your child stay in-state, with better tuition costs, or go out of state?
  • What kinds of costs can be expected if you child lives away from home?
  • How much do you intend to cover, and what is your child responsible for?
  • If you haven’t already, do you plan to open a 529 Plan?
  • Can you use automatic contributions to ensure that you continue set money aside?

For more guidance, check out the Fidelity college conversation checklist.

Don't wait

Talk to Your Child

You also need to involve your child in the process, according to Fidelity. Talk to your child about college, and what they intend to do. Be clear about what you can and can’t provide, in terms of funding. When I was a teenager, my parents told me that I’d be responsible for my tuition, and they’d help me with living expenses — so I knew I would need student loans or scholarships to help me.

My husband and I have already talked to my son about this; we told him we will help him (through the 529), but that he will also be responsible for some of his costs. He’s setting aside 20 percent of his income from his allowance and other ventures to help him meet long-term goals.

It’s important to talk to your child ahead of time about college, and be clear about what you’re able to do. It’s also a good idea to start saving as early as possible. College costs are only going to go up from here.

How did you figure out how much to save for your child’s education? Have you talked with him or her about it?

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{ read the comments below or add one }

  • Andrew Patterson says:

    Why would he want to go the SUU?
    An advantage is that it’s extremely easy to get into since they have an 76% acceptance rate.

  • As a parent, I feel for you. Even at young age, my kids are already thinking about college. And the thing is that they are already thinking how much they have to save so that in the future, they would be able to at least reduce the burden for us, their parents. At least for now, I and my husband are explaining to them that if they want to go to college or a university, they don’t have to worry for money. We, however, still let them save as they want for college. After all, whether they go to college or not, the idea of savings has already been in their minds even at a young age. I and my husband already have a clear idea how much it will cost to send our kids to college, and we have been preparing for that since they were born. All it takes is proper planning.

  • Save and plan early, but don’t forget about scholarships if he is good in anything – sports, music, computers, etc.

  • Jim says:

    By the way I have been a financial advisor for 32 years. Fee based for last 15. Keep school cost as low as possible . Time value of money is a big deal. Money in a Roth IRA at 25 huge. Rather it go there than to student loans because I just had to go to BYU. Be a smart ,thrifty Aggie.

    • David Ning says:

      Putting money away for the kids’ retirement instead of expenses at an expensive private college is an interesting concept I’ve thought about from time to time.

      But what do you say to your children if they were to get accepted to Harvard? I’m pretty sure I’ll still tell them to go, and scrap the retirement idea. 🙂

  • Jim says:

    Live in Chattanooga Tennessee but went to school at Utah State. I have built a great business, have raised a wonderful family and Utah State helped put me in the position I am in today. Stay in state and keep cost down. Local is even cheaper. Not many places in this country nicer than Logan, Utah.

  • conie k says:

    Well I’m using different currency but what I put in is the equivalent of $300 per month

  • jim says:

    We told our son every day (or so it seemed) while he was in high school to save 1/2 of his earnings for college expenses. We fully intended to (and did) pay for all of his undergrad expenses (plus a helluva lot of perks – at least in my opinion). He saved that $ and promptly spent it his freshman year in undergrad. Fast forward – 5 years later – 1st year law student and we told him we were NOT paying for law school so he’d damn well better get a scholarship. Once he was cut off (not entirely) financially, that boy manned up – got a full ride scholarship to a pretty decent law school and has actually learned how to live on a budget. Expect more from your kids – they can and will deliver.

    • David Ning says:

      “expect more from your kids…”

      I needed to hear that, so thanks for the reminder. Sometimes we tend to baby our children and think they would never be up to sniff, but they could achieve so much more if we just let them!

  • David Ning says:

    I setup and started funding a 529 for my daughter and son (4 and 1 respectively). I haven’t sat down to figure out when it would be over-funded, but I’m far from reaching that point so right now I’m just putting a set amount in every year.

  • Good tips! Especially on the 529. I opened a 529 for my daughter as soon as I received her social security card. Regarding how much to save, I just save as much as I could. I figure if I save too much, I can always take back my original contributions tax-free and penalty-free. I wouldn’t mind paying taxes and the 10% penalty on the earning given I have deferred the taxes for so many years. Heck, I can always go back to school and use the 529 myself, provided if there’s any leftover…

  • Cyrus says:

    Two suggestions when setting up investment vehicles for your child’s college education:

    1. Put the first $2000 of savings every year into an Educational Savings Account instead of a 529. The ESA grows tax-free, similar to a Roth IRA. If your ESA contains a good mutual fund and you start when the child is born, this account alone will likely be over $100,000.

    2. Above the ESA contributions, only choose a 529 where YOU have complete control over the investments inside of it. State-run prepaid tuition 529 plans and locked portfolio 529 plans are not good products. Choose a good mutual fund with a long track record of at least the market average annual return of 11%.

    • David Ning says:

      Good call on an ESA, which is an often overlooked way to fund education expenses. There are more rules to figure out, but the benefits are definitely worth it since you can use money from an ESA for K-12 expenses too.

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