I wrote a piece a while back about how much money it would cost to send a newborn child to school. The original is" here":/articles/saving-education-college-cost-for-your-kids. Consider this the quick update.
How does one go about eating an elephant? Although this task would seem overwhelming, the answer is simple: one bite at a time.
We all have goals in our life that seem impossibly big, and many times we fail before we even begin due to the enormity of the task. For most parents, creating a college savings plan is the elephant that makes them want to throw up their hands and say “I cannot save enough for them to go to school, so why try?”
In its most recent survey of college pricing, the College Board reports that a “moderate” college budget for an in-state public college for the 2012–2013 academic year averaged $22,261. That is an all-inclusive number, and is stated in today’s dollars, so if you are planning for a child, we have to account for the future inflation of college costs. This begs the question, “how much would I have to save per month to send my newborn baby to an in-state college?”
The math is simple to calculate. Historically, costs have grown by about 8% per year, but in 2012, this figure dropped to 4.8%. For purposes of this article, I will assume a 6% inflation rate. This means that a child born today will pay a total of $277,962 for an in-state four year degree, shown below.
Freshman Year: $63,540
Sophomore Year: $67,352
Junior Year: $71,793
Senior Year: $75,677
Now, THAT is an elephant! In order to eat it one bite at a time, $579 per month need to be invested into an account earning 8% per year. Even affluent people find it difficult to save that much money, so what should you do?
Eat it one bite at a time…open an account, and start somewhere. Even $50 per month will make a difference to your child, in that they will need to borrow less in the form of student loans once they get to school. Every little bit helps, so do not be intimidated by this elephant.