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College is one of the largest expenses many families will ever face. Depending on the school, the average cost of college ranges from $11,610 for in-state public tuition to $43,350 for private institutions. As such, a good way to ensure your child’s college fund is on track is to devise a savings schedule, wherein annual milestones are based on your target schools’ yearly cost of attendance.
Key Takeaways
- Early college savings reduces long-term financial strain, and setting age-based benchmarks will make it easier to determine how much you should be saving each year.
- Personal savings only need to account for roughly one-third of the total cost of attendance for your target school, with the remaining two-thirds covered by your current income and student loans.
- Contributing to a 529 college savings plan offers tax advantages and growth potential.
Setting Realistic Savings Goals
If you’re unsure how much you should be saving each year, you can create a realistic college funding timeline using age-based benchmarks, per a report from T. Rowe Price. The idea is that each year, you should have a certain percentage of your target college’s current annual cost of attendance saved, with the benchmarks increasing as your child ages.
The exact schedule will vary based on the target college and when you started saving for your child’s education (as well as how much you’ve already saved). For instance, using the example benchmarks from the report, suppose one year of college currently costs $25,000:
- By age 5: You should aim to have saved 60%, or $15,000
- By age 10: 110%, or $27,500
- By age 15: 155%, or $38,750
- By age 18: 175%, or $43,750
This isn’t enough to afford all four years at the target school, but it’s likely still sufficient. When it comes to paying for a higher education, a common rule of thumb suggests families should plan to cover about one-third of the total college costs using their savings. The rest, meanwhile, should come from their current income and student loans (as well as scholarships and other forms of financial aid).
Tip
The earlier you start saving, the more time your money has to grow through compound interest.
Utilizing 529 College Savings Plans
A 529 college savings plan is the go-to savings tool for many families. These state-sponsored plans typically let you withdraw earnings tax-free, so long as the funds are used for qualified education expenses.
You can typically choose from a variety of possible investments to fit your risk tolerance. Because of the higher interest-earning potential, a 529 plan can significantly reduce the amount you need to save compared to using a traditional savings account. However, 529 savings plans also levy a number of fees and other expenses, with the exact costs varying from plan to plan.
There’s no federal annual contribution limit for these plans. However, contributions (plus any other gifts to the same beneficiary) exceeding $19,000 per year (as of 2025) may be subject to a gift tax. Some states also offer tax deductions or credits for in-state plan contributions.
The Bottom Line
College may be expensive, but planning ahead can make it more affordable. Start early, save consistently, and explore the full range of options available to you. By taking advantage of 529 plans and other savings tools, you can confidently prepare for your child’s higher education.
