Family Matters: Paying for College; Your Confident Guide to Educational Savings

Set a Goal: How Much Should You Save?

A good place to start is with a simple estimate.

Rule of Thumb: Multiply your child’s age by $2,500.

This gives you a basic annual savings goal that aligns with the cost of one year at a public university. It does not account for inflation or earnings but serves as a helpful benchmark.

Want more accuracy? Use a college savings calculator to determine your personalized goal based on how many years are left and what you have already saved.

College Costs Go Beyond Tuition

When planning for college, remember that costs include more than just tuition. A realistic budget should factor in:

• Housing and meals
• Administrative fees
• Books and supplies
• Transportation
• Personal expenses

Many families use a combination of income, savings, scholarships, and loans to cover these expenses.

Know Your Net Price

Understanding what you will actually pay out-of-pocket can help you plan more effectively. Financial aid offices calculate this using two numbers:

• Cost of Attendance (COA): The total estimated cost for one year
• Expected Family Contribution (EFC): What your family is expected to pay

Subtracting the EFC from the COA gives you your net price. This is the number to focus on when determining your savings target.

Understand Your Funding Options

There are several ways to pay for college, including:

• Grants and scholarships (do not require repayment)
• Federal and private student loans
• Work-study programs
• Strategic savings accounts, such as a 529 Plan

What Is a 529 Plan?

A 529 Plan is a tax-advantaged way to save for education. These accounts are specifically designed for education expenses.

Benefits of a 529 Plan:

• Tax advantages: Earnings grow tax-free when used for qualified education costs
• Flexibility: Use funds for college, some K–12 expenses, and even trade schools
• State options: You do not need to invest in your own state’s plan, giving you flexibility

Whether you choose a Prepaid Tuition Plan or an Education Savings Plan, a 529 can be a powerful tool in your long-term education savings strategy.

How Much Should You Contribute?

There is no one-size-fits-all answer. Contributions should align with your budget and your goals. You might save more if planning for both K–12 and higher education. Keep in mind that 529 Plans have contribution limits, which vary by state.

Start Small, Stay Consistent

Many people get discouraged if they cannot contribute large amounts, but every dollar helps. The key is to build a saving habit and remain consistent.

Follow these steps:

1. Track your income: Know exactly what you earn each month
2. Track your expenses: Identify where your money is going
3. Find your needs vs. wants: Cut back on extras like subscriptions or dining out
4. Automate savings: Set up automatic transfers on payday
5. Redirect spending: Apply any savings from budget cuts to your college fund

Even small, regular contributions add up over time. The earlier you start, the more your money can grow.