How much do we need to save for college?
The simple answer is as much as you can afford. But remember there are lots of options to help. Not sure if you're ready or don't know where to start? Answer the questions below to test your knowledge of tuition costs and options for how to pay for college.
1. How much was the average budget at a four-year in-state public college for the 2022-2023 academic year?
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A. $27,940
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B. $18,000
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C. $11,140
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D. $39,890
2. Which of the following is a type of college savings plan?
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A. IRA
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B. The Education Forever Plan
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C. 401(k) plan
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D. 529 plan
3. True or false? If your child is already a teenager, it's probably too late to start saving for college.
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A. True
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B. False
4. Family income and savings account for what percentage of the sources used to pay for college?
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A. 13%
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B. 50%
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C. 43%
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D. 60%
5. What was the average combined budget for full-time undergraduate on-campus room and board, books and supplies for the 2022-2023 academic year at a four-year, public college?
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A. $27,940
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B. $19,230
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C. $12,380
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D. $7,300
6. Yes or no? Parents should use money from a 401(k) or individual retirement account to help pay for their child's college.
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A. Yes
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B. No
That's it! Check your answers below to learn more about saving for college. Remember that the important thing is to start now by building a plan and doing what you can.
Answer Key:
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A. The College Board reports that a college budget for a four-year in-state public college for the 2022-2023 academic year averaged $27,940, while a budget at a private nonprofit four-year college averaged $57,570.
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D. The 529 plan, or qualified tuition plan, is a program specifically designed to help families set money aside for education expenses. Parents like the 529 because it comes with tax breaks and other benefits. You can read more about those on IRS.gov. There are two types of 529 plans - savings plans and prepaid tuition plans.
The first type of 529 is an investment account. You add money to your account and invest it in a variety of different mutual funds. All 50 states offer these 529 plans, and they are often more flexible because you can use the money for most qualified college expenses including tuition, room and board and textbooks.
The second option is a prepaid tuition 529 plan. With these plans, you prepay for semesters of college tuition at today's rates. This locks in the price so you don't have to worry about tuition going up in the future. These plans are more restrictive in where and how you can use the funds, and not all states offer them.
Read more about 529 plans. -
B. But keep in mind that the sooner you can contribute to your child's college savings, the longer you'll allow any returns to accrue and the more money you could have to contribute to your child's academic career. Even if you only make small contributions, it's a good idea to begin saving as much as you can.
If you aim to cover as much of your child's college expenses with your college saving plan as you possibly can, it's important to start now. If you can't afford to set anything aside at the moment, be aware that the longer you wait to start saving, the more you'll have to save per month in the future. -
C. According to the 2022 edition of Sallie Mae's annual study “How America Pays for College”, family savings and income only accounted for 54% of the sources used to pay for college. If you are unable to help finance your child's full education in your college savings plan, it's important to be open with them about financial aid option.
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B. According to the College Board, the average budget for a full-time undergraduate on-campus for room and board at a public, four-year, in-state campus was $17,000. The average amount spent on books and other supplies was $1,240.
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B. Don't sacrifice retirement for college tuition. Remember, there are no student loans or scholarships for retirement. That means sacrificing your own future security to pay for your child's college dreams may not really benefit your child, as he or she may need to support you down the road. Consider the importance of your retirement goals - ensuring that you will be able to take care of yourself as you age.
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