Higher Education: How Much Should You Save for College?

For many parents, one of the biggest financial questions they face is: How much should I actually be saving for my child’s college education? The answer depends on a variety of factors, including the type of school your child may attend, their current age, and how early you begin saving. But one thing is clear — college costs have risen dramatically over time.

College Costs Have Outpaced Nearly Everything Else

Since 1983, the cost of college tuition has increased over 900%, significantly outpacing the price growth of housing, medical care, gas, and other everyday expenses.

On average, tuition has increased roughly 5.5% per year, making higher education one of the fastest-growing costs families face. Because of this, the future cost of college may be far higher than many families expect.

What a Four-Year Degree Could Cost

Based on current projections, the cost of a four-year degree will vary depending on whether a student attends an in-state public university, an out-of-state school, or a private institution.

For example, based on current tuition levels and a projected 5% annual increase, the estimated cost of a four-year degree could be approximately:

If your child were entering college today:

• Public (in-state): ~$111,000

• Public (out-of-state): ~$197,000

• Private university: ~$262,000

If your child is a newborn:

• Public (in-state): ~$268,000

• Public (out-of-state): ~$474,000

• Private university: over $630,000 

These numbers can feel overwhelming, but the key takeaway is not that you need to save the entire amount. Instead, the goal is to build a strategy that helps offset future costs.

What Monthly Saving Could Look Like

One of the most common ways families save for college is through a 529 education savings plan, which allows investments to grow tax-deferred and be withdrawn tax-free for qualified education expenses.

To illustrate how saving early can help, let’s assume:

• Contributions start at birth

• Savings continue for 18 years

• Investments earn a 7% annual return

Here is what monthly contributions could potentially grow to by the time the child reaches college age:

Monthly Contribution	Value at Age 18
$100/month	~$43,000
$250/month	~$108,000
$500/month	~$215,000
$750/month	~$323,000
$1,000/month	~$430,000

Even modest contributions can grow meaningfully over time due to long-term compounding.

You Don’t Have to Save the Entire Cost

Many families fund college through a combination of sources, including:

• Dedicated college savings (529 plans or brokerage accounts)

• Current income while the child is in school

• Scholarships or financial aid

• Student contributions or loans

• Assistance from family members

Because of this, the goal typically isn’t to save the entire projected cost, but rather to reduce the financial burden when the time comes.

Don’t Forget the Bigger Financial Picture

When planning for college savings, it’s important to consider the broader financial picture, including:

• Retirement savings

• Debt obligations

• Cash flow and emergency savings

• Other long-term goals

In most cases, retirement savings should remain a priority, since there are loans available for education but not for retirement.

Start Early If You Can

The earlier savings begin, the more time investments have to grow. Even small, consistent contributions can make a meaningful difference over time. If you’re thinking about saving for a child or grandchild’s education, building a plan early can help ensure those future costs are manageable while still keeping the rest of your financial goals on track.

The information provided is for educational and informational purposes only and should not be construed as investment, tax, or legal advice. Financial situations vary, and individuals should consult with a qualified professional regarding their specific circumstances.

Examples provided are hypothetical and are for illustrative purposes only. They are not intended to represent the performance of any specific investment or account. Actual investment results will vary and may be higher or lower than the examples shown. Investment returns are not guaranteed. All investments involve risk, including the potential loss of principal.