It can be difficult trying to figure out how much to save for your child’s future as you’re trying to navigate college costs. College will likely cost much more in the future than it currently does now and you may not know if your kids are even going to attend college. All of this can provide you with a sense of uncertainty.
As part of our annual look at the state of college savings, we surveyed over 1,000 parents in our audience. What we found is that many parents don’t feel confident that they have saved enough. Let’s dig into the details.
Amount Parents Have Saved for College
In our survey, we asked parents how much they have saved for college. About 5% hadn’t started saving yet. Of those that had, just over 30% had saved $10,000 or less, 25% had saved between $10,000 and $30,000, and about 40% had saved more than $30,000.
It’s interesting to note that over 25% of the parents had only been saving for three years or less. However, many in the audience also include long-time savers, with 30% who have been saving for college for more than 10 years.
As much as parents have been able to save, they recognize that there is more they need to do, as illustrated in the next section.
How Much Money Still Needs to Be Saved?
When parents were asked how much more they thought they had to save for college expenses, only about 7% thought they had already saved enough. In fact, over 35% of those surveyed thought they need to save at least $100,000 more for their kids’ college expenses. Depending on how much time they have left, that’s a substantial goal to meet.
The good news is that those who start early and save regularly can make significant progress toward their goals. According to our college savings calculator, a family that saves $250 per month over 18 years at a 7% return can accrue over $100,000 in a 529 plan – which can be withdrawn tax-free as long as the money is spent on qualified education expenses.
What Can Parents Do?
It’s more important than ever to help your children with the growing costs of college so that it isn’t out of their grasp. The best way to do that is to start saving as early as possible and be consistent. You can do that by opening a 529 plan and making regular contributions.
A 529 plan can provide tax benefits and almost give you a head start at hitting your audacious goals. No matter what you decide, it’s important not to get discouraged as it will take time and effort to achieve your goals.