How Much to Save for College: Tuition, Supplies, and Other Expenses
Whether your child or loved one is getting ready for their first day of kindergarten or gearing up for their first week of high school, preparing for college can be a daunting task. Some of the biggest stresses are around saving for college. Families often struggle with this part, but we’ve answered some of the most popular questions people have when trying to figure out how much to save for college.
How much, on average, does four years of college cost?
Before thinking about how much to save for college, let’s look at how much college can cost. According to College Board’s Trends in College Pricing 2022 report, tuition and fees at a public four-year, in-state college is, on average, $10,950 a year (so close to $44,000 for four years). Average tuition and fees for a public four-year, out-of-state college is $28,240 a year (so upwards of $113,000 for four years). The average cost for a private or nonprofit four-year institution is about $39,400 (or around $150,000 for four years).
The above numbers reflect tuition fees. The average cost for room and board at a four-year school will run around $12,000 a year. Books, supplies, and other expenses will add to the annual expense.
As you can see, depending on which type of school a student chooses, the cost could vary widely.
How much should I save for college?
The million-dollar question! Many financial experts recommend planning to save at least one-third of college expenses for your child. The other two-thirds can come from financial aid, scholarships, and student loans.
The earlier you start investing and saving with a college fund, the more it will grow, and the more funds there will be for your child’s education. Use the College Savings 529 Plan Calculator to estimate how much money you may need when it comes time for your child to go to college, and then calculate how much you should set aside each month to reach your goal.
When thinking about how much to save for college, it’s best to have an end goal in mind and make a plan to successfully get to that goal. Start by thinking about how much you can afford, whether it’s $50 a month or $500 — something is always better than nothing. Once you choose how much you can save each month, consider making extra contributions if you get a tax refund or a bonus at work.
Don’t forget that grandparents, family, and friends can contribute to a child’s education with financial gifts for birthdays and holidays.
Do I need to plan to pay full price for college?
That really depends on your family’s financial situation and goals, but there are lots of financial aid opportunities out there for students. Every student should complete the Free Application for Federal Student Aid (FAFSA) to become eligible for scholarships, grants, student loans, and work-study programs. Most students will qualify for some form of financial aid.
We encourage students to seek out additional scholarships, grants, and other sources of income before planning to pay for everything out of pocket. There are thousands of scholarships out there! We have resources for North Carolina grants and scholarships on our website. Every little bit helps!
What are some good college savings options?
There are several ways to save for college. Choose the option that works best for your risk tolerance and saving goals.
A Roth IRA
This is typically used for retirement, allowing post-taxed money to grow tax-free. A lesser-known use for a Roth IRA is for higher education expenses. There’s normally a 10% withdrawal penalty for withdrawals before age 59, but that doesn’t apply to qualified college and higher education costs. Talk with your financial advisor before opening an account to see what can work for your family.
General Savings Account
These can be an easy way to automatically add money using bank accounts you or your child already have. However, the interest rates and growth potential in savings accounts tend to be lower than other saving and investing options.
The NC 529 Plan
One of the best ways to save for college is with the NC 529 Plan. This is a way for money to grow tax-free and be used for any qualified education expense — not just college. Your child can use it for a career and technical program, an apprenticeship, K–12 tuition, and more.