No doubt about it; college can be expensive. But parents looking to kick-start their savings may not need as much as they think.
During the 2014-15 academic year, the average annual cost to attend a four-year private college was $42,419, and a public four-year college, $18,943, according to The College Board's latest figures. That's up 1.6 percent and 1 percent, respectively, from the previous year. If costs keep on climbing at a rate of about 2 percent per year as they have on average in recent years, parents of a child born this year could expect to need $249,707 to cover four years of private college education, per SavingforCollege.com's calculator. The tab for public college would be $111,511.
That's a daunting total, even broken up over as many as 18 years of contributions. Only 18 percent of Americans say they have the financial resources to send their child to college, according to the Country Financial Security Index, and Sallie Mae estimates that only 48 percent of parents are actively saving for that goal.
But don't panic just yet. "You don't need to save the full amount," said Mark Kantrowitz, senior vice president and publisher of Edvisors.com. Many advisors suggest thinking about the cost of college in thirds, he said: one-third to be covered with savings, one-third to be paid at the time of attendance through scholarships and your current income, and the final third to be covered with "future income," or loans.
Revising the calculation to cover 33 percent, SavingforCollege.com estimates parents would need to put aside as little as $179 per month for that private college education, assuming a 6 percent annual return. Eliminating your student's loan burden with a savings goal of 67 percent bumps the monthly contribution to $362. For a public college education, savers would need to put away $80 to $162 each month, respectively, to hit those percentage targets.
Of course, a big part of that advantage comes from starting early to let the invested funds grow over time. The older your child, the bigger your monthly contribution will need to be. A late college savings start is the biggest financial regret for moms of teenagers, with 44 percent in a recent NerdWallet.com survey saying they wished they had known to start saving for college immediately.