How Much Should You Save For College?

Most students understand that a college education doesn’t come cheap, but few families are truly prepared for the bottom line. Luckily, scholarships and grants can cover some of the expenses, and students loans are great to pick up other costs. Still, by saving, you can ensure that you you have enough money to pay for college without worrying about how you’ll cover all of your bills.

According to reports, private four-year colleges cost an average of $25,143 annually during the 2008 – 2009 school year. Comparable public schools are much less expensive, with the average annual cost in 2008 – 2009 being $6,585. Two-year schools cost an average of $2,402 annually in 2008 – 2009. No matter what option you choose, school can be expensive.

Of course, you don’t have to pay the full cost upfront in most cases. Two out of every three students receive grants or scholarships. Students at private schools averaged $10,200 in financial aid, while students at four-year public schools and two-year schools averaged $3,700 and $2,300 respectively.

Still, that leaves you with hundreds or thousands of dollars to pay in tuition, and you’ll have other bills as well, such as room and board and textbooks. If you’re a parent reading this, you should start saving now, even if your baby was just born yesterday. A 529 plan, which is meant to help families save for college, is a great option, since this money is tax-free. Smart Money has a great article about these savings plans.

If college is fast-approaching for you or your child, however, there are still ways to save money. How much will you have to save? Actually, most students can afford to go to most schools with the help of student loans. Loan amounts are determined on your family’s current savings, so when you fill out your FAFSA form, you’ll notice that your loan amounts will coincide with what you can afford to pay upfront. Still, as you save for college, that money is earning interest for you until you pay tuition. On the other hand, when you borrow money, even with low-interest student loans, your money isn’t earning for you – you’re paying the loan company interest.

If you’re still worried about paying for school after learning about the federal student loans you’ll be offered, there are other loan sources you can explore. Sallie Mae is a great private loan source for students, and you can also approach banks and other loan companies for information about loans for school.

Saving for college doesn’t have to be hard. Here are some tips you can use, no matter how near or far away those years are for you or your child.

  • Put a very small amount away for college every single month. Even if you can only afford $100 a month, you’ll be surprised how quickly that adds up.
  • Don’t gamble with the money. Although it can be attractive to put money into stocks, choose less risky investment options, like you’ll find with a 529 plan.
  • When your child receives birthday or holiday money, put at least half of it into the bank to go towards textbooks during college.

You can see more college savings tips online here.

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