College Savings: Are You Keeping Pace?
Level savings of $24,000 each year, combined with a 2006 contribution of $88,000, is necessary to fund your children's college education. This plan requires that college investments earn an average return of 7.00%, and that education costs increase by NO MORE than 5.00% each year. Lower investment returns or higher than expected costs could still leave you short of your goal.
College planning, like every aspect of your financial plan, works best when ACTUAL results are compared frequently (every 18 months or so) with projections – so that minor adjustments will avoid major surprises.
College Savings: Target Schools & Projected Costs
College Savings: Planning for Ever Increasing Costs.
Your oldest, James, will begin college in 2 years. Your youngest, Michelle, will begin college in 9 years. Today, UC Berkeley’s tuition and board totals $19,066, but those expenses are projected to increase 28% by the time James begins the final year. For Michelle, Stanford’s current tuition and board will increase 80% by the final year. Keeping pace with these ever increasing costs is a major challenge.
Action Step: Maintain Level Savings of $24,000 Each Year.
Even at this rate of savings, you still require a 2006 lump sum contribution of $88,000 to fully fund your children’s college education. While homeowners usually look first to equity loans, don’t miss out on valuable financial aid. A recent study found that 22% of families making $100,000 or more were receiving financial aid.