Saving For College: How Much Is Enough?

University Of Birmingham Hold Degree Congregations
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If you want to pay for your child to go to private college, start the day she's born.

Save somewhere between five and nine cents of every dollar you make. (For public college, put away about three cents.)

Continue for the next 20 years or so, and you'll have about three quarters of the cost of college. Your child will still have to rely on other sources of funding — a job, scholarships, loans, etc. — for the rest.

That's the advice from Fidelity, which yesterday put out this guide to saving for college. (Fidelity manages some states' college savings plans, so the company makes more money when more people save for college.)

They give different advice for people at different income levels. The bottom line is that, even though families with lower incomes get more financial aid than those with higher incomes, they still need to save a higher percentage of the money they make.

Here are the recommendations (note that the absolute dollar amounts will change over time):

College Savings
Fidelity Investments

The recommendations are based on several assumptions:

  • College prices will increase by 5.4 percent a year (significantly more than inflation), based on data from the College Board.
  • Each family's income will increase by inflation plus an additional 1.5 percent a year (that's based on data from the federal government).
  • The money will be invested in stocks and bonds, and the investment portfolio will perform somewhere in the middle of the historical range.

These assumptions seem reasonable enough. But, of course, they're subject to a lot of uncertainty. So you could follow them and still come up short (or have more than enough).

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