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How Much Do I Have To Save For College Each Month? (6+ Tips for College Savings Goals)

How Much Do I Have To Save For College Each Month? (6+ Tips for College Savings Goals)

April 20, 2022

College is a considerable expense, and saving for it can be overwhelming. With tuition and living costs getting higher each year, it's essential to prepare and plan for the years ahead. Whether you're saving for one child or hope to send a few to school down the road, we understand the frustrations of college costs - and are here to help you navigate your savings plans. 

Take a deep breath and sit back. We're sharing our top tips and recommendations for what you need to know when planning for college expenses ahead. 

1. Choose An End Goal

We love the approach of working backward when you're saving up for anything. Arbitrary savings isn't always helpful without the bigger picture to know where you're heading. If this is your first go-around with college savings, we recommend you first look at how much college costs. While many factors come into play, like the type of school, the location, and the expected rise in costs, you can get a sense of what goal you're working towards. 

You can also talk with a financial advisor or look for free online cost calculators to determine the yearly cost of various schools and degrees. 

If your child already has an idea of where they want to attend school, you should also research the cost of attending that specific place, the area's cost of living, and the potential for aid or scholarships. 

2. Decide Based On What You Can Afford

If the end goal approach doesn't quite work for you, another common approach to saving for college is figuring out how much you can afford to put away. If you're setting a monthly savings goal, sit down with a budget sheet and identify what extra funds you have that can go specifically towards school savings. 

This is an excellent approach for those who don't have much wiggle room in their budget or if their child plans to use the money you contribute and pay some themselves/using financial aid. 

3. Start Saving As Early As Possible

It's probably no surprise that the earlier you start saving, the better off you will be. Time is on your side in the long run and can allow you to save more and potentially invest those funds in an account where the interest can grow. A small amount each month can accumulate to more significant funds over a long time than a larger lump sum that doesn't have an opportunity to grow. 

4. Commit to a Monthly Contribution

Committing to a monthly contribution goes hand in hand with sticking to a savings plan within your means. A monthly contribution allows you to save towards your end goal without overextending yourself month over month. 

How much should you be saving right now? Most 529 college savings plan contributors have between $37,328 on the low end and $245,427 on the high end held in their account for their child by age 18. If you estimate your end goal amount, calculate how many years you will be saving over, and then divide the two numbers, which can give you a ballpark figure for how much you should be contributing each year. Divide that number by 12, and you have an estimated monthly contribution. 

5. Compare Personalized Student Loan Rates

Student loan rates should be a determining factor in who you choose for repayment options. Lower rates mean much fewer interest costs over time. We recommend comparing rates from different providers and considering which loans may have fixed vs. variable rates. While variable rates may initially look lower, they can change over time and drastically increase loan interest costs. Fixed rates will lock in the rate you go with forever - and refinancing loans down the line can still be an option. 

6. Open a 529 College Savings Plan 

A 529 college savings plan is a state-sponsored investment plan that enables you to save money for a beneficiary and pay for education expenses. You can withdraw funds tax-free to cover nearly any type of college expense, and these plans may offer additional state or federal tax benefits.

This is a great way to set money aside and gain practical tax advantages securely. 

7. Find A Student Loan Financial Advisor You Can Trust

Pathway Financial Group offers student loan advice and can set up college savings accounts for you or your children, designed to assist with saving for education expenses. Ready to start saving for your future? Schedule an appointment today!