Parenthood can be both wonderfully rewarding and frighteningly challenging. Children give gifts only a parent can understand–from sticky-finger hugs to heartfelt pleas to tag along on Saturday morning errands. You raise them with a clear goal that you secretly dread will actually take place–that someday they will be grown, independent, and ready to move out on their own, and your work will be over.
Start building a college fund now
According to the College Board, for the 2017/2018 school year, the average cost of one year at a four-year public college is $25,290 (for in-state students), while the average cost for one year at a four-year private college is $50,900 (the total cost of attendance includes tuition and fees, room and board, books and supplies, transportation, and other miscellaneous costs). Even if those numbers don’t go up (and they are expected to continue increasing), that would come to $101,160 for a four-year degree at a public college, and $203,600 at a private university. Oh, and don’t forget graduate school.
College costs may seem daunting, especially if you’re still paying off your own college loans, but you have about 18 years before your newborn will be a college freshman. By starting today, you can help your children become debt-free college grads. The secret is to save a little each month, take advantage of compound interest, and have a sum waiting for you when your child is ready for college.
The following chart shows how much money might be available for college when your child turns 18, if you save a certain amount each month.
| Child’s Age Now | $100/month | $200/month | $300/month | $400/month |
| Newborn | $38,735 | $77,471 | $116,208 | $154,941 |
| 4 | $26,231 | $52,462 | $78,693 | $104,924 |
| 8 | $16,388 | $32,776 | $49,164 | $65,552 |
| 10 | $12,283 | $24,566 | $36,849 | $49,132 |
| 14 | $5,410 | $10,820 | $16,230 | $21,640 |
| 16 | $2,543 | $5,086 | $7,629 | $10,172 |
| Table assumes an after-tax return of 6%, compounded monthly. This is a hypothetical example and is not intended to reflect the actual performance of any investment. All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. | ||||
Keep saving for retirement
Many well-intentioned parents put saving for retirement on hold while they save for their children’s college education. But if you do so, you’re potentially sacrificing your own financial well-being. If you postpone saving for retirement, you might miss out on years of tax-deferred growth, and it may be hard to catch up later.
Ideally, you’ll want to save regularly for both goals. but if you have limited funds, prioritize saving for retirement. Your child may receive financial aid to pay for college, but there’s no such option for you.