<p>One way to think about how much to set aside is to calculate the expected future cost at your in-state flagship, increasing the current Cost of Attendance (from the school’s website, with room and board) by 6% each year until your child would start college and then continuing to increase it 6% a year for each year your child is in college. So, add up how much 4 years will cost at your in-state flagship – that’s one estimate. Four years at a private school will cost somewhere around $48K this year, and again you’d have to grow that by 6% a year until college starts – that will give you a reasonable upper bound.</p>
<p>So now you know that college might cost $X for in-state, and $Y for private. Some nifty calculators at Fidelity.com will let you figure out how much you would need to set aside, but as a really gross rule of thumb you can assume that if you consistently save 4% of the target total each year, by the time your child goes to college you’ll have the approximately the target total assuming that you get moderate returns. </p>
<p>Many, many families would be absolutely thrilled to have the cost of in-state flagship option in the bank before the child starts college – then if your finances are strong, you may be able to fund the incremental cost for private college out of current income, but at least your child has a generally great basis from which to start the college search. If your investment returns a much better return, you may be able to accumulate more, either towards
undergraduate or graduate school.</p>
<p>You should take a look at your own state’s 529 plans – some are really excellent, some aren’t. There are some ratings you can review. Also, some states have some benefit if you contribute – perhaps a tax deduction. </p>
<p>Again, congratulations. Such a wonderful time!</p>
<p>Congratulations. Don’t save anything. Buy a lacrosse stick. Sorry, couldn’t resist.</p>
<p>This is a great question and I am sure you will get a couple of good answers from the wizards on here (that would not be me). Those of us who have saved and made good financial decisions all along sometimes feel as though our kids’ tuition is off-setting someone else’s financial aid. Twenty years ago when I was first pregnant, I would have never dreamed that a year of college would cost $60K. We saved and saved and saved and now we are nearing retirement. We have a hard time justifying tuition at a top tier college as full pay parents versus accepting a full-tuition scholarship at a top-fifty college.</p>
<p>My advice would be to save for out-of-state tuition, room amd board. Right now per year, in state tuition, room and board are around $20,000. OOS about $30,000 (though some like UVA and Michigan are higher). Top private schools are $50K to $60K. Who knows what it will be in 18 years? The middle figure doesn’t leave as big a gap as saving for in-state costs. The other thing I would do? Move to a state with GREAT public universities and start brainwashing the little tyke about in-state U as soon as possible.</p>
<p>I do wish you the very best: they grow up so fast.</p>
<p>Front load your contributions in the early years. The contribution you make in year 1 has 20 years to grow (senior college) and you may get lucky and get several big years of growth. You also may get several bad years (2007-2008) but you will have time to recover. The last year you make contributions, even at the compounded amount, will grow the least and will be the most dear of money.</p>
<p>Mutual funds are great for relatively steady growth and stability. But you also need to take risk just as you need to take very little risk. An investment in a risky ‘item’ may lose your total investment in that ‘item’ but the otherside is that you may get lucky and that ‘item’ may increase many many times.</p>
<p>I think you should wait until your child arrives and you know your child’s capabilities and likely interests, how you’ll be dealing with elementary and high school educations, and yes, until you know you eventual family’s size.</p>
<p>Once you have it figured out, and you’re in a position to do so, open a 529 plan and contribute as much as you can up to the annual maximum. It’s currently $13,000/year.</p>
<p>Save as much as you can, make it a priority and don’t think it is too early. Diversify, use 529 but also set some aside in case you end up with a kid who does not need the money for college.
Good luck. We started early and I wish we had saved more.</p>
<p>If you’re making 300K/year, save 100% of private school COA. If you’re making 20K/year, save nothing. </p>
<p>About 70% (that number is disputed, but regardless a significant amount) of intelligence is inherited. Are you and your wife smart? Regardless of how smart you two are, I don’t think a decision on one of those amounts is meaningful (gotta see the other 30% first), but it might give you an idea of where you will be looking at in the future. If you two are PHD holders, aim high, middle school dropouts, aim low. I think the mother’s intelligence is a better indicator than the fathers, so you would want to weigh her intelligence more heavily than your own. Though if the first thing you thought of when you found out she was pregnant was “We need to save for college!” then I imagine education is a pretty high priority for you.</p>
<p>Hah - I’ve always wondered about this.
(BTW I’m a student, so don’t take any of my advice seriously)</p>
<p>Qwerty makes a good point that how much you save should be dependent on your income.</p>
<p>Many private schools will meet close to 100% of need if you’re making next to nothing. However, if you have significant savings, then they will deduct need awarded.</p>
<p>If you plan on making too much money to receive financial aid, you might as well save as much as you can ;).</p>
<p>If you are able to save – do it. As someone who had to rely on financial aid to put my kids through college, it is NOT good planning to assume that your kid will qualify for aid or get enough to attend the college of their choice. </p>
<p>Whether or not you can manage to save enough for whatever college will cost in 2029, I don’t know. But as long as you are simultaneously saving for retirement and manage your money well – then it makes sense to save while you can. (Unfortunately life has a way of throwing up unexpected barriers.)</p>
<p>I don’t think you should tie up the “college” savings when your kid is young though. Don’t put the money in the kid’s name just yet – and keep in mind that you could need the money for unexpected high expenses for the kid’s benefit well before the college years come up.</p>
<p>And congratulations – my first grandson is due later this month – so I’ve been thinking along the same lines.</p>
<p>I would plan for private school - consider it a goal: if you make it great, if not, your child will adjust accordingly. If you can, put the maximum allowable (under the gift tax threshold) into a 529 account each year. You can front load it every five years - up to $65K for each parent for the five year period.</p>
<p>I agree with the other posters that if you are making enough money to save for retirement and additionally for college, save as much as you can. College costs are not going down and planning for a child to get scholarships and merit money is risky. If you are an upper middle class family you are most likely going to be paying most if not all of the cost.</p>
<p>If your state offers a Pre-pay plan, consider that.</p>
<p>How much can you afford to contribute to an account each year? Also, will this be your only child? If not, consider that you’ll be contributing to more than one account at the same time.</p>
<p>Learn how to manage your own investments - self-study some accounting and finance so that you can read financial reports. There is considerable turmoil in the financial world and a lot of debate about what the future financial environment will look like. It’s as important to do a good job managing your growing savings as it is in setting aside savings.</p>
<p>Sounds like you are in a position to save, which is great. It all comes down to establishing your priorities. Im a big believer in the school of thought that says Maximize your retirement savings first. At least make it a priority to save enough for retirement to capitalize on any company-match contributions.</p>
<p>FWIW, Im also a big believer in dont sacrifice all of today for tomorrow. We strove to strike a balance between responsible saving while still enjoying the life we were leading. Our philosophy was: Retirement first, college second, family vacations third. We made family vacations a priority over vehicles, clothes, furniture, etc. This country, and the world (though tougher to pull off) is an amazing place. I think we (and the kids) greatly benefited from our opportunities to experience some of our national parks, beaches, cities, historical sites, etc. But thats us. Everyone has their own preferences. </p>
<p>If you’re on this site, youre obviously off to a great start in educating yourself on the process. Reco trying to keep up with it. Betcha the rules will change once or twice over the next 18 years. </p>
<p>We started saving when our child was born. It was easy to forgo restaurants and lengthy vacations with her college fund as a priority. She was a fairly good student with an amazing voice and musicality. Thank goodness we saved for her educatiion. After two years in a BA program she transferred to a conservatory. She has had some scholarships which help. Because she is now getting a BFA, it will take her 5 years to graduate. I don’t know where her talent and passion came from. Having money saved prepares you for unexpected talents and if it’s in the arts you especially don’t want your student to have debt at graduation and while I might have preferred a more stable major for her, we don’t get to chose.</p>
<p>We started buying U.S. Savings Bonds (monthly) for each of our two children right after they were born. We put money into other funds also but the Savings Bonds turned out to be very good investments over the long haul. We saved the equivalent of instate public univ. cost for each child. Both kids went to the state u’s so will have no debt and leaves our retirement funds untouched.</p>
<p>Savings bonds did turn out to be good investments as they are safe and not subject to the wild swings of the stock market. The rate of return was decent during those times when the Fed dropped interest rates.</p>
<p>Absolutely true! Learning about investments and how to invest is key to growing that little nest egg for the next 20+ years.</p>
<p>I ran a quick “how much to save for college” using the calculator on the College Board site. Using $50,000 as the annual cost, factoring a 5% increase per year, and 20 years until starting college, the calculator spit out that you need to save for 4 years of private college in the future…drum roll please…</p>
<p>$571,802!!! :eek:</p>
<p>Just realize that families pay for college using a number different avenues, not just savings. Parents take a second job, a stay at home parent may go back to work. Kids take out loans, parents take out loans. Kids have summer jobs and jobs on campus while going to school. If you are lucky, your kid will get scholarships.</p>
<p>I applaud you for starting to think about saving for college. We started when our oldest was 5 years old and her sister was just born. We saved, invested and were blessed by a decade long bull market. May you be so lucky!</p>