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Saving for your child's education – how much is enough?
Only two in five families have a plan for how to pay for college, according to Sallie Mae’s annual How America Pays for College report; yet, in the last academic year, families spent an average of just over $24,000 on college. Fortunately, you don’t have to strain your budget if you decide now what to save and where to put it.
Know the costs. The average cost of a private four-year college was $31,231 in the 2014-2015 academic year; $22,958 at a public out-of-state college; and $18,943 at a public in-state school. These figures include tuition, room and board where applicable, and other college-related expenses.
Decide what you can afford to contribute. There’s no rule that says you have to fund 100 percent of your child’s college education—especially if it will endanger your own financial future. Savingforcollege.com has a college savings calculator to help you figure out how much to put away, if you provide an idea of what percent you want to contribute, the expected cost of the college, and the number of years you have to save.
Choose a college savings plan. There are a multitude of college savings plans and other savings vehicles to choose from, including 529 plans, prepaid tuition, UTMAs, IRAs, and more. Find more information about your options at http://www.finra.org/investors/college-savings-comparison-chart.
Don’t forget other sources of money. By filling out a Free Application for Federal Student Aid (FAFSA), your child will also receive a financial aid award package from his or her school, so odds are you won’t be required to pony up for the entire cost of college. Your child should also look into both local and national scholarships. CollegeBoard.com and Fastweb.com are two sites with scholarship search engines.
