How much to save for college? That’s the number one question many parents ask themselves every day. This is because many know just how much debt one person can accumulate. After all, student debt is at an all-time high, with the average graduate leaving college with nearly $30,000 in loan balances.
To help your child start their adult life on more secure financial footing, you might consider starting a college savings fund.
The big question that goes along with this sentiment, however, is how much do you need to save for college? Use these steps to figure out a monthly game plan for your child’s future tuition.
Estimate Your Anticipated Contribution Amount
Though you want to pay for every single thing your child will need for his or her matriculation in the years ahead, you will by no means have failed if you won’t be able to reach 100%. Put aside what you can, and calculate how much that will be in the years ahead.
There’s no need to get fancy, just search for a simple savings calculator on Google. Not only will this give you a better idea, but it will motivate you to stay on target.
Consider Each Child’s Age and Future College Costs
The older your children are, the more you’ll need to dedicate to their account each month. If your children are younger, you obviously have more time and can contribute less each month. That said, you still need to have a ballpark number to aim toward.
To get a decent approximation, we recommend using a college cost calculator.
College cost calculators can tell you approximately how much your child will need to go to college in x amount of years. Some can even tell you how much debt he or she will have if you contribute x percent.
This is good because many parents that can easily afford to pay for all of their children’s expenses only choose to cover a certain amount. This is because they believe it will encourage their children to work hard and strive to get a great job right out of college. It’s basically the same reason banks want a down payment because without one, home buyers might be tempted to walk away from all responsibility.
Don’t Sacrifice Your Own Retirement Savings
Think of the saying that when you’re in a crashing airplane, put your air mask on first before your child’s. This might seem a bit harsh, but it’s an apt metaphor for your finances as well.
Disregard your own retirement, and you’re just planting a bomb for your child to defuse one day. Like it or not, children take care of their parents when they get old.
Before you put aside 100% of your nonessential money into your child’s future, make sure you’re putting aside enough for you to retire one day as well.
How much should you put aside? That depends on when you want to retire. Some say 10%, while others say 20%. Whatever amount you choose, just make sure that you’re putting aside enough money for you to retire at the age you want.
Your children will likely need you as much in the distant future as they will in the not-so-distant future.
As you can see, there’s not a concrete answer to ‘“how much should I save for college?” There are a lot of factors to consider, including whether or not you actually want to give your children a 100% free ride.