How Much to Save for College

Dawn Papandrea
Natalie Taylor, CFP®, BFA™
How Much to Save for College

College is expensive, but it doesn’t have to saddle your future scholar with hundreds of thousands of dollars of debt. By figuring out how much to save for college and putting a plan in place to make it happen, you can create a more affordable experience for your family. 

Learn more about how to estimate the future cost of college tuition and room and board, the pros and cons of various college savings options like 529 plans, and how to make room in your budget to get started.

What Will College Cost? 

According to the College Board’s Trends in College Pricing report, for the school year 2022-23, the average tuition and fees for full-time undergraduate students were:

  • $10,940 for Public four-year in-state

  • $28,240 for Public four-year out-of-state

  • $39,400 for Private nonprofit four-year

That doesn’t include room and board, which can cost anywhere from $8,556 to $12,870 per year.

The final cost also depends on the school your child chooses. Since the costs above are averages, you could end up paying as much as $80,000 per year.

So what will college cost in 18 years? It’s anyone’s guess, but we can estimate. Let’s take the example below.

Future College Cost Example

Say you have a child born this year who will attend a California public university as an in-state student. With a current tuition of $13,750 annually, let’s estimate that by 2041, the tuition will cost approximately $33,000 per year (assuming an average 5% per-year price increase).

Let’s also assume your child will be dorming, at an added cost of $28,000 per year in future dollars (again, with 5% annual inflation).

To cover the cost of that four-year degree (around $252,000 with room and board included), you’d need to save just over $750 per month starting now, assuming a 5% annual rate of return on your savings.

Of course, that’s just one scenario. Private colleges and universities can have much higher sticker prices, and the example above doesn’t factor in the cost of books and other supplies.

You can use this college cost calculator to help you zero in on a more personalized estimate.

Consider Financial Aid

The good news is that it’s unlikely you’ll pay the full ticket price of college. The majority of students qualify for financial aid (which is need-based), merit scholarships, or both.

So, look at the “net price” of college, defined as the difference between the published price and the average grant aid received by full-time students. This net-price calculation is more closely aligned to what your financial obligation would be.

In 2022, the typical family paid for college costs with:

  • 43% from parent income and savings

  • 26% from scholarships and grants

  • 11% from student income and savings

  • 10% from student borrowing

  • 8% from parent borrowing

  • 2% from relatives and friends

Get Your Kids to Help

It’s reasonable to ask your kids to shoulder some of the load as well, whether through getting a job to contribute funds or applying for student loans. On average, parents pay about 50% of the total cost of college. 

How Much Money Should I Save for College?

There’s no one-size-fits-all answer. Here are a few popular methods to consider:

Method 1: Save One Third

One popular approach for determining how much to save for college is to pay one-third of college costs from savings, then cover the remaining two-thirds from your income and financial aid or loans.

Getting back to the example above, to cover a third of the cost of your teen going to a California public university as an in-state student, your goal would be to save $250 per month.

You can run your own numbers using the average cost of your preferred school type.

Method 2: Save $2K to $3K per Year

Another guideline you may have heard is to save $2,000 to $3,000 each year of your child’s life. If you save $2,000 per year with a 5% annual rate of return, you’ll have a little over $56,000 by age 18. If you upped that to $3,000 per year, you’d come out with $84,000. 

Method 3: Save What You Can

Choosing either of the above approaches can work well, but perhaps the best advice is to simply save what you can. Every dollar you save will help reduce the amount you’ll have to borrow. More importantly, you shouldn’t focus on college savings until you address three other key financial priorities:

  1. Build a fully-funded emergency fund (equivalent to at least six months of take-home pay). 

  2. Pay off any high interest debt (anything above 7%). 

  3. Work up to saving at least 10-15% of your gross income for retirement (because there are no loans for that!).

After you know how much to save for college, the next question is, where do you put the money as you save it? That’s next.

Best Accounts to Save for College

A great option to save for college is a 529 plan. These plans have useful tax benefits that enable you to use earnings tax-free for eligible college expenses. To avoid tax penalties, you’ll want to be sure you’ll use all the money in a 529 for school expenses. If you’re not sure, there are other options to explore as well.

529 Plans

A 529 plan is an individual investment account designed specifically to save for college. Anyone can open one, and the money grows tax-deferred. When you use it for higher education expenses (tuition, fees, room and board, books, a laptop, lab supplies, etc.), you won’t pay any tax on the withdrawal. Depending on your state, you may get another tax benefit in the form of a state tax deduction on contributions.

You can also choose how to invest the money in a 529 plan. One option is an automatically managed age-based portfolio that’s rebalanced periodically based on your child’s age.

If your child doesn’t ultimately attend college, you can change the beneficiary of a 529 plan to another qualified family member. However, if you use 529 funds for something that doesn't qualify as an education expense, the earnings will be taxed as income and you’ll owe a 10% penalty as well. 

Other Ways to Save Money for College




Brokerage account

No contribution or income limits; not limited to education expenses

Fewer tax advantages than 529 plans

Earnings are taxable as capital gains

UTMA (Uniform Transfers to Minors Act) Account

No contribution or income limits; not limited to education expenses

Larger impact on financial aid eligibility because it’s a student asset; student controls the account when turning 18

Income earned is taxed at the tax rate of the minor 

Coverdell Education Savings Account (ESA)

Tax-free earnings and distributions if used for education

Must be used by the time the student turns 30

Income limits on contributions

Withdrawals not used for the beneficiary's qualified education expenses are taxed and penalized (10% on the earnings portion)

High-yield savings account

No contribution or income limits; not limited to education expenses; no investment risk

Limited opportunity for growth

Interest earned is taxable


No contribution or income limits; not limited to education expenses; no investment risk

Money is tied up for the CD term or you’ll pay a penalty

Limited opportunity for growth

Interest earned is taxable

For more info on the best college savings vehicles, see our article: 529 Plans and Other College Savings Accounts

Once you know how much to save for college, you need to know how to go about it. Here’s how to get started.

How to Start Saving for College

Saving over time can make it easier to save a large amount, but the earlier the better. Before you start saving for college, make sure your emergency fund is fully stocked, your high-interest debt is paid off, and you’re making good progress on saving for retirement. See our article on financial goals for couples for more info.

Automate Your Saving

When you’re ready to start saving for college, review your budget and see if you have funds available monthly. If you do, set up automatic contributions so you can “set it and forget it.” Choose a set amount that will go straight into your 529 account, or another account earmarked for college savings.

If you don’t have any wiggle room in your budget, you can still get started by allocating a portion of any bonuses or other windfalls you receive to your college saving account. 

Manage Gift Giving from Family and Friends

Another way to build up your college savings is to encourage family and friends to make a contribution for birthdays and holidays. This method has the added bonus of cutting down on toy clutter.

Pro Tip: You can lower how much you have to save for college by managing your child’s expectations, researching merit awards, and staying close to home. See how below.

Ways to Reduce the Cost of College

Saving as much as you can for college is just half of the equation. The other half is trying to keep college costs low. These days it isn’t necessary to pay top dollar for your child to have a great college education, and there are many ways to make a degree more affordable.

Set Realistic Expectations 

By the time your child is in high school, set their expectations by going over how much you’ve saved for college so far. Explain how much you’ll contribute beyond what you have saved. Finally, discuss how their college choice will affect the amount of student debt they’ll need. Help them understand that their “dream school” doesn’t have to be the most expensive one.

Also, it’s worth talking to your child about the ROI of the degree they choose. To do it, search the average starting salaries of different fields of study. You can then compare them to the costs of degrees your child is considering at different universities to see how much return on investment they’ll get on their education in terms of future earning potential.

Your child’s ultimate decision shouldn’t be guided only by the cost, but it’s smart to factor in that information to avoid surprises.

Research Schools That Offer Generous Merit Awards

A U.S. News survey of the top 1,000+ colleges found that the average merit award for full-time students in the 2019-2020 academic year was $11,287. In 2022, 60% of families used scholarships to pay for college. Do some digging to see the average awards offered by your student’s schools of choice, and how to qualify for the maximum award amount.

Consider Starting at a Low-Cost Community College 

Community college is affordable (just $3,860 on average for the 2022-2023 school year). It gives the student the option to live at home for two years and transfer to a four-year university after that. This can be ideal for students who aren’t sure what they want to study yet.

Stay Within Driving Distance 

If your child will stay in a dorm, choosing a college that’s far away means adding the expenses of traveling back and forth, paying for overnight hotel stays when visiting, and having to pay to store or ship their dorm gear during summer months.

Get Kids in on the Savings

Saving for college should be a family affair. Enlisting their help in the saving process gives your child some skin in the game to help grow their pot of money. It also cultivates valuable savings habits they can benefit from later in life.

In their younger years, guide your kids to contribute a portion of their allowance and monetary gifts toward their college fund. You can even offer a parental match: For every dollar they save, promise to match it up to a certain amount each year (on top of what you’re already saving, of course).

Help them Save

When they’re old enough to do odd jobs like babysitting or mowing lawns, or to get a part-time job, have them allocate a percentage of their income toward their college fund. 

Once they’re in college, encourage your young adult to investigate ways to offset some of their living expenses. For example, they can get an on-campus job or apply to work as a Resident Advisor (if they’re dorming), which can mean free room and board.

Pro Tip: A simple, intuitive budget app like Monarch Money can help you and your kids plan and save together as they grow. The app lets you sync and track income, expenses, and savings across multiple accounts.

How Much to Save for College: Key Takeaways

Saving for college can help make a degree more affordable, with less reliance on student loans. Once you’re in a strong financial position, start squirreling away as much as your budget allows and let compound interest work its magic.

Enlist family, friends, and your kids to help with the savings mission, too! Intuitive software can help you find room in your budget for college savings and track your progress all the way through to graduation.

Dawn Papandrea Personal Finance Writer
Natalie Taylor, CFP®, BFA™ Head of Financial Advice at Monarch

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