Everyone knows college is expensive, but did you know that college costs have risen 4% annually over the past 40 years?
I recently gave birth to one of the cutest baby boys on the planet named Ezra. He will be nine months in a week so this means that by the time he goes to college, I will have to pay more than double in college expenses than the average parent is paying today.
Whelp, it looks like I better start saving if I want to keep up.
The current average cost of a public 4-year in-state college is $24,610 per year. College costs are so high these days I won’t scare you with the costs of out of state colleges. If college costs continue to rise by 4% each year, it will cost Ezra a whopping $211,709 for his degree. I hope my son likes ramen noodle.
Saving for College, a resource for unbiased college information, recommends that you save at least 25% of the projected cost of college for your child. Loans, grants, scholarships, and current income will usually supplement the rest. They offer a great college savings tool that will help you determine how much you should be contributing to your child’s college plan. I put Ezra’s numbers into the tool and if I were to invest into a 529 plan that earns 6% each year after-tax, I am going to need to start making monthly contributions of $114 to the 529 plan if I want to cover 25% of his projected college costs.
You can check out the tool here: http://www.savingforcollege.com/college-savings-calculator/
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Before investing, the investor should consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.
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