Save Something

Take the figures from the College Board—the $20,770 average cost for a child at an in-state university for the 2017–18 academic year and the $46,950 for a private college. Multiply those sums by four years, throw in 3% annual inflation for 18 years, and you are looking at some $141,000 for an in-state university and $320,000 for a private college. That’s how much it might cost to send today’s toddlers to college.

To amass those sums, you would need to save $320 a month for 18 years for the in-state university and $720 for the private college, assuming a 5% annual return and assuming you stepped up the sum saved each year with the 3% inflation rate. For most parents, that simply isn’t doable, especially because they also need to save for their own retirement. In fact, retirement should take precedence: Your kids can take out loans to pay for college, but for retirement you’ll need to start out with a heap of cash.

Still, save what you can. When it comes time to pay those college bills, you’ll be grateful for any cash you have set aside. Where will the rest of the money come from? If you’re like most parents, you will muddle through, paying college costs out of current income, perhaps getting some help from the grandparents, asking your children to take on loans and also borrowing money yourself.

If you put aside at least some savings, it may allow your children to graduate without crippling amounts of student debt that could create heaps of financial stress and limit their career choices. But that still leaves two questions: How should you invest your children’s college savings—and what sort of account should you use?

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