Get a Head Start on College Savings
It’s a daunting prospect. In 18 years, attending an in-state public college for four years will likely cost a total of about $233,000.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

The morning after my husband, Tom, and I learned that I was pregnant, I found him quietly tapping and clicking on his laptop. If I weren’t already sure that we were a match made in personal finance heaven, that moment would have confirmed it: He was looking up projected college costs a couple of decades down the road.
A year later, we’re getting serious about socking away money for our son’s future education expenses. It’s a daunting prospect. In 18 years, attending an in-state public school for four years will cost about $233,000, assuming 5% yearly inflation in average college costs, according to the College Board’s College Savings Calculator (opens in new tab); a private college will run $528,000. Plenty could happen before 2037 to reduce the price of a college degree, but I’m not counting on it.
How much to save. A common guideline is to save about one-third of your child’s expected college expenses and cover the rest with loans, financial aid and current income while the child is in college, says Mark Kantrowitz, publisher and vice president of research at Savingforcollege.com (opens in new tab). That means we’d have to save anywhere from $78,000 for a four-year, in-state public school to $176,000 for a private college.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The numbers are intimidating, but, says Angie Furubotten-LaRosee (opens in new tab), a certified financial planner in Richland, Wash., “anything saved is better than zero.” Thanks to the power of compounding interest, even if you set aside only a small amount, you’ll benefit from an early start.
As you decide how much you can afford to save, put your own needs first. If you haven’t stashed at least three to six months’ worth of living expenses in an emergency fund or paid off high-interest debt, focus on those tasks. Retirement savings should also take priority over paying for college. Your options for funding retirement are limited, but your children can apply for scholarships and grants, take out loans, work part-time, and choose relatively inexpensive schools.
The 529 advantage. A 529 college-savings plan is a great place to save. Your contributions grow tax-free, and withdrawals aren’t taxed as long as you use them for qualified college expenses, including tuition, room and board, books, and computers. Generally, you’ll pay income tax and a 10% penalty on earnings—but not contributions—for nonqualified withdrawals.
Every state except Wyoming has one or more 529 plans. You can invest in any state’s plan, but many states offer a tax deduction or credit on contributions for residents who invest in their state’s plan.
If your state has no tax break—or if it’s one of a handful that offer a break no matter which state’s plan you choose—shop for a plan with low fees and strong investment options. You can often choose among age-based portfolios that dedicate a higher portion of the savings to riskier (but higher-reward) stock investments in your child’s early years and shift to a more conservative allocation as college nears. Go with a direct-sold plan, which comes with lower fees than a broker-sold one. Compare plans at Savingforcollege.com (opens in new tab).
Tom and I went with Ohio’s CollegeAdvantage Direct 529 Savings Plan (opens in new tab) (Ohio is where we grew up, and Tom has maintained residency there as a military officer). In addition to an initial chunk of cash, we are having $250 transferred into it monthly. If we keep up the contributions and earn a 7% annual return, we’ll have about $119,000 in 18 years. Even if we have to dial back our savings later, we hope that getting off to a strong start will put a sizable dent in our son’s college bill.
Lisa has spent more than15 years with Kiplinger’s Personal Finance and heads up the magazine’s annual rankings of the best banks, best rewards credit cards, and financial-services firms with the best customer service. She reports on a variety of other topics, too, from retirement to health care to money concerns for millennials. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.
-
-
Stock Market Today: Stocks Close Higher in Volatile Session
The major indexes spent most of Thursday in rally mode, but selling pressure emerged in afternoon trading.
By Karee Venema • Published
-
Federal Electric Bike Tax Credit Would Offer up to $1,500
Lawmakers have proposed a bigger version of an e-bike bill that would provide a tax credit of up to $1,500 on some new electric bikes.
By Kelley R. Taylor • Published
-
How to Pay off Credit Card Debt
Making Your Money Last Keep up with credit card bills using these tried-and-true strategies.
By Ellen Kennedy • Published
-
Student Loan Forgiveness Blocked For Now Due to Court Rulings
Biden's student loan debt forgiveness program is on hold until the U.S. Supreme Court weighs in.
By Kelley R. Taylor • Published
-
Bear Market Strategy for Millennial Investors
A focused, goal-oriented approach to investing can help millennials navigate a bear market.
By Rivan V. Stinson • Published
-
529 Plan Contribution Deadlines
Many states have year-end deadlines for making 529 college savings plan contributions.
By Kelley R. Taylor • Last updated
-
Rent vs. Buy: Sometimes Renting is Better
Personal finance experts have long held that homeownership is a key step to building lasting wealth. How does that hold up in a pricey real estate market?
By Rivan V. Stinson • Published
-
3 Key Ways You Can Help a Child or Grandchild Pay for College
college Options such as 529 plans, education savings accounts and tax-free gifts can ensure you don’t carry a child’s student loan debt into your golden years.
By Tony Drake, CFP®, Investment Advisor Representative • Published
-
Borrowers Over 50 With Student Loan Debt
Paying for College Millions of borrowers 50 and older are struggling to repay loans for themselves and their children, some delaying retirement. There’s a trick, though, to help with repayment.
By Elaine Silvestrini • Published
-
How to Spend $1,000: Find Cheap (or Free) Online Courses to Build Career Skills
Smart Buying There's a huge array of skill-building online courses that can level up your career for under $1,000.
By Kim Clark • Published