Saving for college can feel overwhelming, but starting with clear numbers and the right tools makes the process manageable. Whether you’re a new parent or planning ahead during your teen years, understanding how much to save for college helps you set realistic goals. Rising tuition costs, flexible contribution strategies, and tax-advantaged accounts like 529 plans all play a role in building your savings plan.
Bottom Line Up Front
- College costs are increasing steadily each year, making early planning essential.
- A typical savings goal targets 33% of future costs, with the rest covered by income and borrowing.
- Monthly savings often range between $170 and $485, depending on school type and timeline.
- Investing through a 529 plan allows tax-free growth and withdrawals for qualified education expenses.
- Using a College Savings Calculator can personalize your monthly goal based on your child’s age and your desired coverage.
- Starting earlier takes advantage of compound interest, meaning even small contributions grow significantly over time.
When should you start saving for college?
The best time to begin saving is as early as possible—ideally at birth. Starting early gives your money more time to grow through compound interest, which is interest earned on both your original investment and the interest it has already generated.
For example, if you invest $1,000 at a 10% annual interest rate, you’ll earn $100 after the first year. In the second year, you’ll earn $110, because you’re earning 10% on $1,100—your original investment plus the interest.
Even modest monthly contributions to a 529 plan from birth can build into a substantial amount by the time your child heads to college. Early investment can lower the amount you need to save each month, making it easier to reach your goals without financial strain later.
What percent of college costs should you plan to pay?
Many families aim to cover part—but not all—of their child’s education expenses. In fact, during the 2021–22 school year, about 87% of students received some form of financial aid, including federal grants, state and local grants, institutional aid, and federal student loans. This means most families do not pay the full sticker price out of pocket.
Trying to save 100% of college costs isn’t always necessary or realistic, especially if you have a limited number of years to save. Some parents choose to save a portion and encourage their child to contribute through part-time work, scholarships, or loans. Even if your goal is less than 100%, consistent contributions can meaningfully reduce future borrowing and ease the financial burden when tuition bills arrive.
The One-Third Rule
A practical way to set your college savings target is to use the one-third rule. This guideline assumes that you’ll cover one-third of college costs from savings, one-third from current income, and one-third from loans when the time comes.
Because most large expenses are paid over time rather than in a single lump sum, this rule offers a balanced approach. By saving roughly one-third of the projected costs, you reduce the amount you’ll need to borrow later and make tuition payments more manageable alongside your regular income. It’s not a strict requirement—but it’s a useful benchmark for families creating a long-term savings plan.
How much to save each month
Monthly savings goals depend on your timeline, the type of school, and how much of the total cost you plan to cover. According to the College Board, the published cost for tuition, fees, room, and board at a private four-year college for the 2024–25 academic year is $58,600. Assuming costs rise 4% annually, the projected four-year sticker price for today’s newborn is around $562,177. If your 529 plan earns 6% annually, contributing about $485 per month will cover roughly one-third of that total.
For a public in-state university, the current annual cost is $24,920, with a projected four-year total of $196,238 in 18 years. Using the same assumptions, monthly contributions of $170 would cover one-third of the total.
| Savings Goal | 33% | 50% | 75% |
|---|---|---|---|
| Private (Monthly) | $485 | $725 | $1,100 |
| Public In-State (Monthly) | $170 | $275 | $380 |
| Private (Total in 18 yrs) | $188,800 | $282,200 | $428,200 |
| Public In-State (Total in 18 yrs) | $66,179 | $107,055 | $147,930 |
These figures highlight why starting early matters: saving steadily over 18 years spreads the cost and helps avoid large monthly contributions later.
Closing the gap between college savings and costs
Even if you save diligently, your contributions will likely cover only part of the total cost. For example, saving about one-third of projected costs still leaves a gap of roughly $370,000 for a private university and $130,000 for a public in-state school. Fortunately, most families don’t pay the full sticker price.
According to Sallie Mae’s How America Pays for College (2023–24), 27% of expenses were covered by scholarships and grants. Parents supplied 37% through savings and income, 23% came from loans, 11% from student income and savings, and 2% from relatives or friends. Understanding these typical funding patterns can help you build a realistic plan to combine savings with other resources rather than relying on savings alone.
Setting your custom savings goal
While standard benchmarks are useful, every family’s situation is different. A College Savings Calculator can help you customize your goal by factoring in your child’s age, school type, any existing savings, and the monthly contribution you can afford. The tool projects future college costs and estimates how much of that total you’ll be able to cover through your savings, scholarships, and grants.
If you’re starting later than birth, you’ll likely need to save more each month to reach the same coverage percentage. The good news is that you can adjust contributions over time. Using a 529 plan also allows your earnings to grow tax-free, and withdrawals remain tax-free if used for qualified education expenses, giving you more value for every dollar saved.
College Savings Calculator Results Example
When you use the College Savings Calculator, you can adjust different variables to see how your savings strategy performs over time. For example, changing the type of school (private vs. public) or moving a slider to set your desired coverage percentage instantly updates the required monthly contribution.
The calculator assumes you’ll save using a 529 plan, meaning all investment growth is tax-free if used for qualified education expenses. This feature ensures that every dollar you contribute works toward future tuition, giving you a clear picture of how today’s savings decisions translate into tomorrow’s college funding.
Where should you invest your money for college?
One of the most effective ways to save is through a 529 savings plan. This state-sponsored investment account allows you to make tax-free withdrawals for qualified education expenses, including college and K–12 tuition. Since January 2024, any unused 529 funds can also be rolled over to a Roth IRA tax-free (within limits), turning leftover education savings into a retirement asset.
Most 529 plans offer a mix of mutual funds, bond funds, and ETFs. You can contribute up to $15,000 annually (for single filers) without triggering the federal gift tax, and your earnings grow tax-free. Some states also offer extra incentives: for example, New York residents get state tax deductions for contributions to in-state 529 plans.
If you prefer alternatives, you can explore a 529 prepaid tuition plan, which locks in today’s tuition rates at participating colleges. This can be a good hedge against inflation, though it’s limited to 18 state-sponsored programs and usually requires in-state residency, plus it doesn’t cover expenses beyond tuition.
Another option is using a brokerage account through firms like E*TRADE or Vanguard. These accounts offer more flexibility but lack the tax advantages of 529 plans. You’ll pay capital gains taxes on investment growth when you sell, so this option may work best for families who want broader control over their investments.
Final thoughts: Start saving what you can now
The cost of higher education can seem intimidating, but a clear plan makes it manageable. You don’t have to cover everything through savings alone—scholarships, grants, future income, student contributions, and loans can help fill the gaps.
The most important step is to start. Even small, regular contributions to a 529 plan—paired with tools like a College Savings Calculator—can meaningfully reduce your child’s future borrowing needs. Over time, consistency and early action can make a big difference in how much you ultimately need to save for college.
Frequently Asked Questions (FAQs)
When should I start saving for college?
Ideally, you should open a 529 plan and start contributing as early as possible—preferably at birth. The earlier you start, the more time your money has to grow through compound interest, making it easier to meet future tuition goals. But if you start later, don’t panic; you can still make meaningful progress by adjusting your monthly contributions.
What is a good amount of money to save up for college?
A practical benchmark is to save about one-third of projected college costs, with the other two-thirds coming from future income, scholarships, grants, and student loans. This approach helps you build a strong foundation without the pressure of saving 100% upfront.
How much does the average person save for college?
The average family saves around $300 per month for college. Total savings amounts vary by age:
- Age 0–6: $7,929
- Age 7–12: $15,359
- Age 13–17: $27,559
- Age 18+: $27,778
These figures show that many families build their college funds gradually over time.
How much should I save for college monthly?
It depends on your timeline and the type of school. A typical target is $170/month for an in-state public college, $300/month for an out-of-state public school, and $485/month for a private nonprofit college—starting from birth. These amounts align with saving about one-third of projected costs and can be increased over time if your budget allows.
Related Guides to Help You Save Strategically
If you’re planning your next financial moves, these related YouthBudget guides can help you build strong saving habits and plan smarter for the future:
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- How to save for retirement after maxing out your 401(k)
- Fun ways to save for a Disney vacation
- Saving for your first apartment at 18
- How to save money for a house while renting
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Disclaimer
This article is for educational purposes only and should not be considered financial, legal, or tax advice. Policies and regulations can change, so always verify details with your loan servicer, state 529 plan administrator, studentaid.gov, or a qualified financial advisor before making decisions.
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