How Much Should You REALLY Save for Your Kid’s College?
In a Nutshell
Parents shouldn't aim to fully fund college; instead, choose a realistic percentage of projected costs—like 25-75%—and start saving early in a 529 plan, which offers tax-free growth and flexibility for education expenses. Monthly contributions of $285–$570 from birth can realistically build $100K–$200K at 5% returns, but these targets must come after securing retirement, paying off high-interest debt, and building emergency savings. The key is automating affordable contributions while recognizing that scholarships, community college, student work, and cash-flowing part of college are valid ways to bridge any gap.
These notes were generated by AI and may contain inaccuracies.
If you have a baby today and college costs rise by an average of 3% a year, four years at a public university could cost roughly $220,000 by the time that kid gets there. A private university, using the same assumption, you're looking at roughly $466,000. And if you have two kids, well, you can do that math on your own, but those giant numbers create a problem because most parents see them and immediately assume they either need to save hundreds of thousands of dollars or they've already failed as parents. Neither is necessarily true.
The amount you should actually save depends on what kind of college you're planning for, how much of the bill you want to cover, when you want to start investing, and how financial aid treats that money, and what account you use.
Before figuring out how much we need to save, we need an actual target. According to the College Board, for the 2025 to 2026 school year, average published tuition and fees at a public 4-year in-state university are $11,950. But tuition isn't the whole bill. Once you include the average budget for housing, food, books, transportation, and other expenses, the total annual student budget is about $31,000. Now, look at private nonprofit colleges. Average published tuition and fees are $45,000 and the total annual student budget comes out to roughly $65,470 a year. So four years at today's prices would be roughly $124,000 at the average public in-state university and about $262,000 at the average private nonprofit university.
Those are published prices. The sticker does not necessarily mean the net total. College Board estimates that first full-time students at public four-year schools are paying an average of only $2,300 in net tuition and fees after grant aid and tax benefits. Although families obviously still have housing, food, transportation, books, and everything else. Private schools can discount heavily, too. So, don't take a $65,000 sticker price, multiply it by four, and immediately start hyperventilating into a paper bag. Your first job is figuring out what type of school you're realistically planning for and what percentage of that cost you're actually trying to cover.
Nobody knows exactly what college will cost 18 years from now. Starting with today's $30,990 annual public university budget, 3% annual inflation takes freshman year cost 18 years from now to about $52,758. Sophomore year becomes roughly $54,341. Junior year $55,971 and senior year $57,651 for a total assumption of $220,721. Now, if you do the same calculation using today's average private nonprofit budget and you're around $400,663.
From 2015 to 2025, inflation-adjusted tuition and fees at public four-year in-state schools actually fell about 7%. So, I would not make the goal, I need to prefund every possible dollar my kid could ever spend. Instead, I choose how much of the projected cost I'm actually willing to take responsibility for.
The mistake a lot of parents make is they ask, "How do I save enough for college?" The better question is, "How much of college am I choosing to fund?" One way I'd frame this is to pick a percentage you're actually willing to cover. Maybe that's 25%. Using our projected public university bill, that's roughly $55,180. Maybe you want to cover half. That's about $110,361. 75% $165,541. And yes, you could target the entire $220,721, but there's no law saying mom and dad need a giant 529 account sitting there with four years of college fully prepaid on high school graduation day.
You might cover half through investments and pay another portion from your income while your kid is actually attending school. Your child might get merit aid. They might work during college. They might live at home. They might start at a community college for a couple years. Grandma might help. By the time your kid is 18, our AI overlords may have already taken over by now, and college won't even be necessary.
Personally, if saving 100% means you're neglecting retirement, carrying credit card debt, or putting your own finances on life support, I think you're solving the wrong problem.
Vanguard ran the numbers assuming a 5% annual return. If your goal is $100,000 and you start when your child is born, you need roughly $285 per month. Wait until age five and it jumps to about $454. Wait until age 10 and now you're looking at roughly $846 every month. For a $200,000 target, starting at birth requires roughly $570 per month. Starting at age 10 requires about $1,692 per month. That's nearly three times as much.
Take $250 per month invested for 18 years at 5% with contributions made at the end of each month. That grows to roughly $87,300. You personally contributed $54,000 and then roughly $33,300 came from investment growth. 5% isn't guaranteed. Obviously, your actual return will bounce around and your investment mix should generally become more conservative as college gets closer.
If $285 per month is impossible right now, don't turn this into an all or nothing decision. Start with 50, start with 100, increase it when your income goes up. The worst college savings plan isn't starting small. It's waiting too long until it's too late.
For money that I genuinely expect to use for education, I'd probably start with the 529 plan. Contributions to a 529 plan don't give you a federal income tax deduction, although your state may offer its own deduction, credit or other benefit. The big advantage happens inside the account. Your investments can grow tax deferred and qualified withdrawals can come out free from federal income tax. Depending on the state, you may get favorable state treatment, too.
Compare that with a regular brokerage account where dividends, distributions, and realized gains can potentially create taxes along the way. There's another reason why I prefer the 529 over a custodial account dedicated to college money, and that's control. A custodial account is an irrevocable gift to your child. Once that child reaches the applicable age under state law, it's their money. You might have mentally labeled that account Ohio State tuition, but your 18-year-old might mentally label that account used Mustang GT. So legally their opinion eventually wins.
Financial aid treatment can also be better. Under the current federal FAFSA formula, assets owned directly by a dependent student are assessed at 20%. So parent assets including a parent-owned 529 go through a much more favorable formula. You'll sometimes hear people say parent assets are assessed at up to about 5.64%, but that's shorthand. The actual FAFSA calculation is more complicated and depends on the family's entire financial picture.
What if my kid doesn't go to college? That used to be a much stronger argument than it is today because these accounts have become significantly more flexible. Obviously, you can use 529 money for qualified college expenses, including tuition, required fees, books, supplies, equipment, and certain room and board expenses for students enrolled at least half-time. But it goes beyond traditional college. Qualified expenses can include registered apprenticeship expenses and certain post-secondary credentialing programs.
Starting in 2026, federal law allows up to $20,000 per beneficiary per year from 529 plans for qualifying K through 12 programs or K through 12 expenses up from the old $10,000 limit. Up to $10,000 lifetime can also be used towards qualified student loan repayment for an individual. You can generally change the beneficiary to another qualifying family member without treating it as a taxable distribution.
The change that gets most of the attention is the Roth IRA option. Subject to a bunch of rules, unused 529 money can potentially be rolled into a Roth IRA for the beneficiary. There's a $35,000 lifetime rollover limit. The 529 account has to have been open for at least 15 years. Amounts attributable to contributions made within the previous 5 years generally can't be rolled over. The annual IRA contribution limit still applies and other requirements apply as well. This is the biggest reason. So no, this doesn't mean you should intentionally dump an extra $35,000 into every 529 and call it a Roth contribution strategy. But it does reduce the risk of being slightly overfunded. You have way more exits now because of this.
I would not sacrifice my retirement to fully fund my children's college. And I say that as a dad with two daughters who obviously wants to give them every opportunity I can. You need to put your oxygen mask on first. If a plane crashes, well, you're probably dead anyway, but sorry, that's not funny. But you got to put on your oxygen mask first. So, if you're carrying 25% credit card debt, don't send $500 a month into a 529 because some calculator told you your three-year-old is behind. If you don't have emergency savings, fix that. If you're leaving an employer 401k match on the table, I'd obviously take that match before you start funding the 529 plan or, you know, the college side of things, if you will. If your own retirement plan is badly underfunded, I'd work on that, too.
Then start building the college goal around what your household can actually afford. Remember, your child has options. Scholarships exist, grants exist, community college exists, in-state universities exist, work study exists. Your child can contribute. You can potentially cash flow part of college while they're attending. There are federal student loans, although obviously I'd rather minimize those. What doesn't exist is a federal student loan program for a 68-year-old parent who spent their retirement money putting three kids through private college. That's why I wrote you can't borrow for retirement down here. And the irony is that bankrupting yourself to pay for your kid's college can eventually create another financial burden for your kid when you're older.
I'd rather promise a realistic amount and actually deliver it then promise four years anywhere in America and spend the next 18 years trying to chase a moving target.
If I were building this plan from scratch, I wouldn't start by asking how I can save $400,000 for college. I'd start with my own financial foundation, decide what percentage of college I actually want to pay for, and then open a 529 if it makes sense for my situation. And then you obviously automate a reasonable monthly contribution, and then you revisit that plan as time goes on.
I have two daughters myself. I personally believe that college ROI may not be there 18 years from now. My daughters are five and three at the time of this recording. So, let's call it 13 and 15 years. Yes, I have a 529 funded for each of them. But at the end of the day, who the hell knows you guys? I don't even know if college is going to be around in 15 years, at least not in the form that it exists today.
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