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  • Writer's pictureStephen Boatman

Saving For College - 2024

Updated: May 23

Discussing how to save for college is one of the top three topics I discuss with parents. So, I decided to put my thoughts on paper in order to help you all think through the problem a little deeper. To plan appropriately, we need a lay of the land, a target, and a plan to get there. Below, we'll start from a 10,000-foot view (cost) and hone in on a specific goal (monthly savings) and plan of attack (investment vehicle).


How Much Does Higher Education Cost?


This answer depends heavily on what direction we think our children will want to go. Do they want to travel for a year after high school, possibly enter the workforce through an apprenticeship, community college/trade school, or the 4-year college route? Costs for all of these options range drastically, as seen below.



If your child ends up pursuing an apprenticeship, then you don't need to save any money as they earn while they learn. But I've listed some different monthly savings amounts below depending on your return and total education expense.


If you're saving over 18 years you'll need to save the following depending on your future return and savings goal.


7% return example

$25k = $62/month

$50k = $123/month

$100k = $246/month

$200k = $491/month

$300k = $736/month


10% return example

$25k = $46/month

$50k = $92/month

$100k = $183/month

$200k = $366/month

$300k = $549/month


But should we save to cover 100% of our child's college expenses? I would argue that we should save 50% to 75% of our child's future college expenses. This is because costs may inflate lower than expected, kids may receive a scholarship, go to a cheaper school, or not pursue college. I recommend saving 50% to 75% of the all in college cost, assuming we are working while our kids are in college, and we can supplement any shortfall in their education savings with our income.


How Much Will College Costs Inflate?


I don't know. But my guess is lower than what has happened historically. BestColleges.com states that college costs have inflated 3-5% from 2001-2021.


"On average, from 2001-2021, tuition and fees rose 5% annually at public four-year colleges and 3.8% at private four-year colleges."

However, Forbes notes that college costs have hit a price ceiling and have started to drop. 


"Since 2019, however, the trend has slowed. In fact, from the academic year 2019-20 to 2021-22, average tuition, fees, and room and board dropped 0.2% at private nonprofit four-year schools, according to the College Board. From 2020-21 to 2021-22, prices dropped a further 1.7%. Costs at public four-year schools followed a similar pattern in the same timeframe."

This is due to decreased demand for candidates with generic college degrees, increased college competition, decreased societal pressure, and increased financial aid. You can see some of the reduced demand in college enrollment in the image below. Since around 2010, college enrollment has steadily declined, with COVID-19 fueling the fire.


All that to say, I don't believe college costs will continue to inflate at their previous rate; however, it is very college-specific. I would assume closer to a 2% inflation rate for public 4-year colleges and 1% for private or lower-demand schools.


What investment vehicle should we use?


Now that we know some rough saving numbers for our investment goal, what type of investment should we use to get from point A to point B? I suggest considering the options below.



I would rank these items in order of importance from top to bottom. Increasing income is the best way to save for college, and the Dynasty 529 plan is one of the last options for saving for college. You can read more about Dynasty 529 plans HERE.


The above options have nuances we won't have time to get into today, mainly because I don't want to write a 17-page blog. However, because 529s will likely be the most used option, I'll dig into some of their rules and regulations below.



Incentivize Kids


There are two ways that I recommend parents try to get their kids involved. The first is to offer to pay them 25% in cash of any scholarship they receive from the school. Most schools have a scholarship page where they can write an essay explaining why they deserve the scholarship. There are even scholarships for trade schools through programs like the Dirty Jobs host Mike Rowe Works Foundation. Aligning incentives for you and your kids can save money for you both. Also, some parents say they will pay for the A's and B's, but kids will pay for C's or less. This will hopefully encourage the student to take their education seriously and pay attention/try during class.


Is College For Everyone?


We should remember why people started to go to college in the first place. It was to provide them with a better quality of life. However, as college has become a requirement for the masses, the promise of this better life has been harder to attain with just a college degree. We are now at the point where 40% of 4-year college students drop out, and 59% take more than four years to graduate. Also, the market for college graduates has become more competitive, meaning their incomes are lower than expected when graduating. College may make sense for some who do well in that environment and need the degree to pursue their desired career. However, It isn't the only way to set your kids up for a better future. Every person should lean into their strengths and passions to have the best chance of succeeding in this world. And anything parents can do to help their kids find and develop their strengths is doing a good thing for them.


I hope you found this helpful, and if you want to talk through any of the options above or regarding other retirement topics please feel free to call or email me.


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