Does anyone know how much parents should save on average for college for one child?

Question

I'm just curious...for one child, what would be a decent amount to have for a child going to college when he's ready to go? My son is 3 now and I'm just curious. I'm a SAHM and my husband is a teacher and we can't put much away every month now but I'm contributing something. When I go back to work, we'll definitely put away more each month.

Answer 1

The average cost for a 4 year degree at a state college, including tuition, board & lodging,  and trips home ( 2 a year ), is about $28,000/yr.  Or   $112,000 over 4 years.

This is in today's dollars.

By the time your son turns 18, even if inflation is just 3%,  it will be about $40,000 or more per year.  Or $160,000 for a 4 year degree.

For private or ivy-league universities, add about 50% to those numbers.

Answer 2

If your child goes to a State school, the costs will not be very high. On the other hand, if he goes to a private school you could be paying 20-40k/year. Additionally, do you want the fund to cover graduate level education as well?

Investing in a 529 or any kind of investment vehicle for your son's education is a great idea. Remember to invest FIRST in your retirement accounts (401k/IRA/etc) as that is the most important place to put your money. You cannot get a loan to cover retirement, but your son can get a loan to cover college expenses if required.

With that said, if you are currently investing enough in your retirement plans, an investment in a college fund would be great. Future college expenses are hard to asses, so don't try to cover it all. Any money you put into a 529 or similar plan will alleviate the pain for your family when your son goes to college.

How much should you invest? Whatever you can easily afford. Don't stretch yourself for a college plan.

I have not answered your question though so I will attempt to below.

The following assumes a 15 year investment period with periodic investments every month (ie 12 investments each year). I will assume a 8% return on equity (or 8% interest gained through your investments). A higher interest rate or return on equity would reduce the required investment each month.

Monthly investment required for 40k at 18 - $115.59

Monthly investment required for 20k at 18 - $57.80

For every 10k you want at your son's 18th birthday, you will need to invest approximately $29 a month starting now. If you wanted 100k at your son's 18th birthday you would need to invest 29x10 or $290/month. Bear in mind that this is assuming an 8% return on investment.

Keep in mind that the annual inflation rate is ~3.5%. This means that $10,000 in 15 years is worth $5,968.91. That means that given a 3.5% inflation rate the real value of every 10k is really only ~6k. So a 24k degree today would be worth 40k in 15 years.

Answer 3

i think a college education is now around $175000.

Answer 4

As much as possible.  Obviously it depends on what kind of school he goes to and the financial aid he gets, but the full cost could be 20-30k a year and up (at least)