Fidelity recently released guidelines for how much should be saved by parents at different incomes to pay for their kids' college costs. They estimated the cost of private and public colleges in 18 years, subtracted expected financial aid, assumed a given return rate, and then estimated the total amounts people should save. The summary:
According to Fidelity, a family making $55,000 would need to save $48,000 to cover the qualified expenses of a public university and $107,000 to cover such costs for a private one. This translates into saving $160 a month for a public college and $410 a month for a private one.
In contrast, a family making $75,000 would need to save $51,000 total, or $190 a month, for a public university and $115,000 total, or $410 monthly, for a private one. Finally, according to Fidelity, a family making $100,000 would need to save $55,000, or $250 a month, for a public university and $123,000, or $460 monthly, for a private one.
So, how are you doing?
BTW, this assumes that you're paying all of your kid's college expenses yourself (no loans) and that you're paying it all out of savings (versus out of current income). And the biggest assumption (at least some will say this is the biggest) is that you're paying for your kids' college expenses in the first place. But we've debated that over and over, so I'll skip it for now.
What I'd like to discuss is how we are all doing when compared to these guidelines. I'll start:
1. Here's my college-paying/saving philosophy:
- My kids will do the best they can in school so they can maximize potential scholarships. This is their contribution to college (plus a bit of savings and potentially working during school.)
- We will together select a school that we think is a good value (one that gets them where they want to be in life/career that doesn't cost an arm and a leg.)
- My wife and I will pay for this.
- We will save for the vast majority of these expenses in advance so we don't have to spend anything out of current income. We're saving using Education Savings Accounts and 529s for our kids.
2. That said, we need to save somewhere in the $55,000 to $123,000 range. Since we're pretty good bargain-hunters and know a bit about saving on college expenses (like taking some classes while in high school, going to a community college the first two years of school, etc.), I think we'll be closer to $55k than $123k even if our kids go to a private school. So let's say we'll need $75k for each kid saved to cover college expenses.
3. We currently have $55k saved for each child. My son will be off to college in four or five years and my daughter a couple years after that. So we should be good (we sock away at least $5k per child per year to get the max state tax savings from our 529s.)
Now, how are you doing?