A reader asks HerMoney CEO Jean Chatzky how much she should save for her children's college education.
Twice a week, our CEO and resident money guru Jean Chatzky tackles your burning questions in the HerMoney newsletter. We’ve pulled some of the best to feature on our website — and this one made the cut! Got a question for Jean? Send it her way right here.
Q: Today’s question comes from Sue. She writes: “Is there a target savings goal for children’s college accounts, akin to the retirement goals of X by X age?”
A: Good question, Sue – and there’s really no one right answer. It’s going to boil down to your family’s financial situation and your child’s future educational goals.
That said, there are several different approaches financial professionals typically use. One of them? The rule of thirds, where you cover a third of total college costs via savings, a third through scholarships, financial aid, or ongoing financial support while your child is enrolled, and lastly, you plan to cover the final third via student loans.
Another common strategy involves saving a percentage of the total estimated cost of college. For many families, the goal is 50-70%, with the remainder being paid for via financial aid, scholarships, or other sources. Again, it’s going to depend on your family’s financial situation.
Regardless of what method you use, it’s important first to get an idea of what the tab for four years of higher education will run you. According to the Education Data Initiative, the average cost of college in the United States is $38,270 per student per year, including books, supplies, and daily living expenses. Of course, that amount can be lower or higher, depending on whether your child attends a public or private school. Not cheap by any means, but you’ve got this!
MORE ON HERMONEY:
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- Ask Jean: “Should I Add Myself To My College Student’s Lease As A Guarantor?”
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