How Much Should I Save For My Kid's College Education? Here's How To Figure It Out

Trying to make the most of much should save kid? You are in the right place. Below we break it down in plain English, with practical tips you can actually use.

Key Takeaways

• Are you confused about how much to save for your kid's college education?
• Here's everything you need to know.
• But how much should you save for your kid’s college education?

Are you confused about how much to save for your kid's college education? Here's everything you need to know.

But how much should you save for your kid’s college education? Here’s how to figure out what works for you.

Set Your Future College Savings Goal

The bad news is that college isn’t expected to get cheaper anytime soon. The good news? You don’t have to save for the full cost. Shoot for one-third.

Why? The remaining two-thirds can be filled in by scholarships, financial aid, student loans, and current income (whether that’s your income or your student’s money from a job or work-study). This is a rule of thumb used by financial advisors across the country. It can also save your sanity by making your savings goal a little more realistic.

Tools like this one can help you map out how much to save based on your child’s current age.

If the number you see seems daunting, don’t worry. FinanceFixx, HerMoney’s financial coaching program, makes saving for big goals, like your child’s college fund, feel simple and doable. With simple-to-follow tips, one-on-one coaching and a community of like-minded women, you’ll learn how to create a smart savings plan that fits into your busy life, so you can rest simple knowing you’re on track to give your child the future they deserve.

There are other tools you can use too, like 529 plans.

Invest Your Savings With A 529 College Savings Plan

A 529 college savings plan can help your savings go further. It’s a tax-advantaged investment account that works like a Roth IRA, offering tax-free growth and tax-free withdrawals. And yes, parents can open a 529 plan for their child’s college savings. It’s not just for grandparents!

Most 529 plans also offer a passively managed, age-adjusting portfolio option that starts with higher-growth investments (e.g., stocks) and becomes more conservative as your child approaches college. This means your money grows over time, while you’re also reducing risk as you approach college costs.

What difference do these tax savings and investment gains make? If you have a 4-year-old child targeting a private university, your monthly savings goal might be $700/month using a savings account versus $400/month with a 529 college savings plan. That’s a big difference!

There are a lot of 529 plan options, but investing doesn’t have to be complicated. Get started by:

• Comparing the fees and investment portfolio options. Look for a low-fee plan (typically offered directly by a state) with age-adjusting portfolio options.
• Checking if your state offers an income tax deduction for using its plan. If so, take advantage. But remember, you can have multiple 529s, especially if you want to use a better plan for contributions beyond your state’s deductible amount.
• Making sure it’s simple for you (and your family) to use. If you want to get the grandparents involved, make it simple for them!

Commit to a Monthly Contribution

The best monthly savings goal is the one you’ll stick to, so choose one that fits your budget. For numerous families, this is about 10 percent of discretionary income.

Beyond that, ask yourself: Who are the key people in my child’s life? Most likely, numerous of them would love to help, and there are numerous occasions when they can: birthday parties, holidays, early school graduations, and other personal milestones.

Ask relatives to swap out a gift for a birthday or holiday and give a small contribution to college instead. Your child won’t know the difference , and let’s be honest, they probably have too numerous toys as it is.

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Final Thoughts

Before you check out, double-check much should save kid against current offers and any coupons you can stack. Small habits like this add up to real savings over a year.

Originally published at savingswitch.com.