How much to save for college: A guide for parents

Quote How much to save for college

Saving for your child’s college education is one of the most impactful ways to invest in their future. Starting early and creating a plan tailored to your family’s goals can help make higher education more accessible and affordable.

As tuition and living expenses continue to rise, understanding how much to save using a college saving calculator — and where to save it — is essential.

Understanding college costs

How much to save for college avg annual cost

College expenses go beyond tuition. Parents and students need a full picture of all the costs involved to create a savings plan that works. Understanding where the money goes can help families prepare more effectively, from tuition and housing to textbooks and personal expenses.

Tuition and fees

Tuition and fees typically make up the largest share of college costs, but they vary widely depending on the type of school and program.

Public universities often offer lower tuition rates for in-state students, which average around $9,750 per year, while private colleges average $38,768 annually. Some specialized programs, like engineering or nursing, may have additional fees.

Some colleges offer fixed-tuition plans that lock in rates for four years to make tuition more manageable.

Comparing tuition costs across schools and factoring in potential scholarships or financial aid can help narrow down options that fit your budget.

Room and board

Housing and meal plans are another major expense to consider, with costs averaging $27,146 annually at public universities and $58,628 at private colleges.

On-campus housing provides convenience but can be pricey. Depending on the area, off-campus living might be more affordable but typically involves additional costs like utilities and groceries.

For families considering commuting, this option can save you money, though it may not offer the same on-campus experience. Each living arrangement has pros and cons, so balancing cost with convenience and the student’s preferences is important.

Books and supplies

Textbooks, lab materials, and other supplies often cost around $1,220 per year. These expenses can vary depending on the student's major or specific course requirements.

To save money, consider renting or buying used textbooks, accessing digital copies, or using library resources. Planning ahead for these costs ensures that your children will have what they need without surprise costs.

Additional expenses

Beyond the basics, there are other costs, like transportation, personal items, and extracurricular activities. On average, students spend $2,000 to $3,000 annually on these miscellaneous expenses.

Transportation costs might include public transit, car expenses, or trips home during breaks. Personal expenses can cover clothing, toiletries, or tech gear. Extracurriculars, such as sports or clubs, may also require a budget.

Factors influencing how much you need to save

How much you should save for college depends on several key factors, which vary by family and student.

By understanding these variables — like the type of institution, residency status, and potential financial aid — you can create a savings plan that aligns with your and your child’s goals and needs.

Type of institution

The kind of college your child attends has a significant impact on costs.

Public universities typically offer lower tuition rates, especially for in-state students.

Private colleges often have higher tuition but may provide smaller class sizes or specialized programs.

Community colleges are a cost-effective starting point, offering two-year programs at a fraction of the cost of four-year institutions.

When deciding, consider both the financial and academic benefits. Public universities often have diverse programs and larger campuses, while private colleges may offer more personalized attention. Community colleges allow students to complete general education requirements affordably before transferring to a four-year school.

Research your options to find the best fit for your budget and your child’s goals. Some institutions also offer program-specific scholarships or grants, which can help reduce costs.

In-state vs. out-of-state tuition

Residency status significantly affects tuition at public universities.

In-state students usually benefit from lower, state-subsidized rates — averaging $10,560 per year at four-year public schools — while out-of-state students pay more, with an average cost of $27,020 annually. If you're considering out-of-state schools, be sure to factor the higher costs into your savings plan.

Out-of-state colleges can offer unique academic programs and experiences, but it’s important to weigh these benefits against the additional expense. Some states have tuition reciprocity agreements that reduce out-of-state rates for residents of neighboring states, so check for these options.

Additionally, scholarships for out-of-state students may help bridge the gap, making these schools more affordable.

Financial aid and scholarships

Financial aid and college scholarships can significantly lower the cost of college. Grants, scholarships, and work-study programs are valuable resources that don’t require repayment.

The first step is completing the Free Application for Federal Student Aid (FAFSA), which determines eligibility for federal, state, and institutional aid, and some merit-based aid. Understanding how much aid your family might receive can help you set realistic savings goals.

Financial aid can come from many sources, including federal and state governments, colleges, and private organizations. Scholarships may be based on merit, financial need, or specific talents, while grants are often need-based.

Work-study opportunities can also provide students with part-time jobs to help cover expenses. Apply for as many scholarships as possible and explore all available options to maximize support.

Setting college savings goals

Creating clear and actionable college savings goals is key to funding your child’s education.

It’s a good idea to take the time to estimate future costs and take advantage of tools like savings calculators. In doing so, you can build a realistic plan that keeps you on track and motivated as college approaches.

Calculate future college costs

College costs are rising steadily, with the average increase of tuition being 3-4% per year. Planning for this inflation forms an important part of your strategy. A college cost calculator provides a clear estimate of expenses, helping you plan and budget for higher education.

For example, if today’s annual costs are $25,000, they could climb to approximately $52,000 in 15 years. As a parent, you need to project these numbers so that you can set clear savings targets reflecting the true cost of college when your child will be attending.

When you’re working on estimating future expenses, remember to include all components of college costs — not just tuition. Factor in room and board, books, supplies, and any personal expenses you may need to cover. A consistent inflation rate provides a realistic picture, helping you avoid underestimating your needs.

Plan with a college savings calculator

A college savings calculator is a powerful tool for turning your goals into a practical savings strategy.

They account for variables like your current savings, expected contributions, investment returns, and inflation rates to show how your funds will grow.

Experimenting with a calculator can help you explore different scenarios. You can test how increasing your monthly contributions, starting earlier, or choosing different investment strategies impacts your savings. 

In addition, a budgeting app like Albert can also offer you tailored insights into your own spending, making it easier to stay on track and adjust your plan as needed.

College savings plans

Another important step in funding your child’s education is choosing the right college savings plan. The right account could offer you tax benefits and investment opportunities to help your savings grow. 

529 College Savings Plans

A 529 plan is a tax-advantaged account designed specifically for education expenses. 

Your contributions grow tax-free, and withdrawals for qualified education costs—like tuition, fees, and books — are also tax-free at the federal level. Many states improve the deal even further by offering tax deductions or credits for contributions.

There are two types of 529 plans: prepaid tuition and education savings.

Prepaid tuition plans lock in today’s tuition rates for future use, offering predictability. 

Education savings plans instead provide more flexibility for various qualified expenses.

Each state’s 529 plan is slightly different, so it’s worth exploring the options to maximize benefits. Additionally, these plans allow for diverse investment strategies so that you can adjust based on your own goals and risk tolerance.

Coverdell Education Savings Accounts

Coverdell ESAs let families save up to $2,000 annually per child, with earnings growing tax-free. Withdrawals for qualifying education expenses — covering everything from kindergarten to college — are also tax-exempt.

While ESAs offer more investment flexibility than 529 plans, they come with lower contribution limits and income restrictions.

This account type may be a good pick for families wanting broader control over their funds' investments. Options include stocks, bonds, and mutual funds, allowing for active management and potentially higher returns. However, due to contribution caps and income thresholds, ESAs may not be suitable for all families. 

Custodial accounts

Custodial accounts, such as UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts, are another way to save for college.

These accounts allow parents or grandparents to invest funds on behalf of a minor, with the assets transferring to the child when they reach adulthood (typically 18 or 21).

Unlike 529 plans or ESAs, custodial accounts don’t offer tax advantages for education expenses. Additionally, assets held in a child’s name can impact financial aid eligibility, which may reduce the amount of assistance they qualify for.

On the upside, custodial accounts allow for a broad range of investments and aren’t limited to education-related expenses. When your child gains control, they can use the funds for any purpose.

Strategies for saving for college

Building a solid college savings plan can be easier with the right strategies. Starting early, automating contributions, and involving family members can make saving simpler and more effective.

Start as early as possible

How much to save for college grow

The earlier you start saving, the more time your money has to grow, and even small contributions can make a big impact over time.

For example, saving $200 a month from birth could grow to over $77,000 by age 18, assuming a 6% annual return. Starting early can spread the savings effort over many years, reducing financial strain as college approaches.

Small, consistent contributions are key. Whether you can save a little or a lot, the sooner you start, the more manageable your savings journey will be. Establish and stick to a plan early — it’s one of the simplest ways to maximize your savings potential.

Although starting earlier is best, remember that it's also never too late to start saving, no matter your child's age.

Automate your contributions

Automating your contributions can help take the guesswork (and some of the effort) out of covering college costs. Set up automatic transfers from your checking account to a college savings account, like a 529 plan. This can help ensure you’re saving consistently without thinking about it.

Be disciplined and avoid the temptation to skip a month. Automating these transfers ensures the funds are allocated before they can be spent elsewhere, keeping you on track toward your goal.

Involve the whole family

College savings don’t have to be a solo effort. Family members can play an active role in building the fund. Instead of traditional birthday or holiday gifts, encourage relatives to contribute to a college savings account.

Many 529 plans even offer gifting programs that simplify this process.

Inviting family members to contribute will help increase college savings and create a shared commitment to your child’s future. These contributions, big or small, can add up over time and ease the financial load on parents. Saving together as a family also builds a support network for your child’s education.

Adjusting your savings plan over time

If there is a significant change in your life, your child’s college savings plan will need to evolve along with it. This is why it’s a good idea to regularly review and tweak your strategy to ensure it stays aligned with your financial situation and future college costs. 

Annual reviews

Set aside time each year to review the savings plan and track progress. Life changes — such as shifts in income, expenses, or investment performance — may require updates to your savings rate or investment strategy. Annual reviews also offer you a chance to celebrate milestones and stay motivated.

Adjustments for changes in college costs

College pricing may not always rise as predicted, so it’s important to keep an eye on trends in tuition and related costs. If costs are climbing faster than expected, you may want to consider increasing your contributions or exploring additional savings options.

Update your estimates regularly to ensure your plan stays realistic and achievable. Being well-informed and flexible will help you keep your savings plan effective — even as circumstances change. 

Making the most of college savings

Preparing for a child's education starts with understanding how much to save for college. Breaking down costs, setting clear goals, and choosing the right savings plans are critical steps to building an effective strategy.

By planning ahead and making informed choices, you can balance your current finances with your child’s future college needs.

⚡️ Start planning for your child's education with our team of finance experts. Albert can help.

Frequently asked questions

How much money should you have saved for college?

For in-state public colleges, aim to save $3,300–$10,000 per year, based on current tuition and fees averaging $11,000 annually. You'll need to save significantly more for private colleges, which average $39,400 annually.

How much is $100 a month in a 529 plan for 18 years?

If you contribute $100 monthly to a tax-advantaged 529 plan for 18 years, starting with an initial $2,500 investment, your savings could grow by over $6,300 more than in a taxable account, assuming similar investment returns.

Is $100,000 enough for college?

$100,000 (about $25,000 per year) typically covers the costs of an in-state public university. For private colleges, where annual costs often exceed $60,000, this amount may only cover a portion of the total expenses.

How much should parents pay for college?

On average, parents cover about 43% of college costs using savings and income, plus another 8% through loans. This amounts to approximately $13,000 per year in parent contributions.

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