One reader wonders how much to start saving for his children's college tuition.
Q: My kids are still young but my wife and I want to start saving for their college tuition. How much money should I be setting aside for their college education?
I suppose it depends on how much of your child’s tuition you want to pay.
A: FinAid recommends that you expect to pay half to two-thirds. Some parents may want to pay for all of the tuition, but you also want to take into account the possibility of grants, loans and scholarship money. Also, “tuition” doesn’t include room and board, which you might decide to pay for and could add another $10,000 onto that bill.
Sallie Mae is expecting college tuition to increase annually by 7%. The site even has a nifty calculator to help you figure out how much to save depending on what the current cost of attendance is at the college of choice and how many years you have until your child is college ready. So, if you expect your 5-year-old son or daughter to go to Princeton University — current annual tuition around $37,000 — you better save up close to $400,000 to cover all four years. If Rutgers, the State University of New Jersey is the way to go — currently $9,926 for state residents — then you’re looking at a more manageable $106,204. And that doesn’t take into account the cost of room and board.
The younger your children are, the more you should start saving, because by the time they head off to college, prices will have been steadily on the rise for years. Even if you can only put away $50 a paycheck, it will go a long way to helping your kids out.
But you should keep an eye on your own retirement savings. If your child has to take loans out to pay for college, he or she will have years to pay that back. But you won’t have that luxury and you might find yourself still working full time during what should be your golden years. So save what you can for college tuition, but don’t neglect saving for your own retirement.