By Kelly Hodges
Many parents identify as a financial goal the desire to “pay for college” for their children. Setting the goal is easy, but in order to achieve it you will first need to figure out how much it will cost. No doubt the numbers are intimidating. This year the average cost of resident tuition at a state school is $8,244. A private school will set you back $28,500. Did I mention that’s just tuition? For one year?
As if that’s not expensive enough, there are other costs to factor in as well. Room and board, books and supplies, transportation costs, and personal expenses must also be considered. Then there are the variables like how many years will it take them to graduate, will they qualify for any scholarships or financial aid, and how many years do I have left to save for all this? Oh, and don’t forget about inflation. Over the last decade tuition and fees for public and private colleges have increased an average rate of 5.6% beyond the rate of general inflation. Forget to factor that in and your savings may fall well short of the dollars needed when your child actually enters college.
Overwhelmed? You’re not alone. Sadly there is not a cookie-cutter estimate that can apply to all families and situation that will magically tell you how much you must save. The cost can differ by tens or even hundreds of thousands of dollars based on the variables discussed above. Every family needs to sit down and look at their own educational goals for their child, and come up with a number to work with. It’s going to be very difficult to know how to structure a college savings strategy if you have no idea how much money you need to save.
Luckily there are a few tools available to parents who are looking for a concrete number to work off of. College Board offers a very comprehensive and current database of the actual cost of attending various schools broken down into different categories. This information can be used if there is a certain school you are hoping to afford for your child. For example, if you went to Georgetown, your parents went to Georgetown, your grandparents went to Georgetown, and the only school that will be good enough for Junior is Georgetown, then here is your breakdown:
-Tuition and Fees $41,393
-Room & Board $13,543
-Books & Supplies $1,270
-Personal Expenses $1,620
-Total Costs for 1 Year = $59,116
If on the other hand you are a resident of Wisconsin and hope to send your child to the University of Wisconsin, the breakdown will look like this:
-Tuition and Fees $9,665
-Room & Board $7,780
-Books & Supplies $1,140
-Personal Expenses $3180
-Total Costs for 1 Year = $22,535
Again these numbers are just a starting point, but at least knowing what your target school costs today can help you calculate what it’s likely to cost in the future. There are multiple college cost calculators available where you can plug in today’s cost of tuition, inflation rates, years until your child will attend, and other variables to get a fairly accurate projection of what you need to save.
This information gathering is a critical first step to determine how much you will need to save for your child’s (or children’s) college expenses. Stay tuned for our next discussion about the different vehicles available to help you save.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of her employer or any other person or entity.