Start College Savings the Day They Are Born

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College graduates gross $1 million more in earnings over their lifetime. Education helps you gain and keep wealth. But paying for it is a daunting prospect – especially paying for it all at once. For some families the price tag exceeds the cost of their home. For those who will not qualify for financial aid, starting a savings plan early is critical. Compounded savings eases the financial burden.

College costs vary between public and private schools, and between in-state and out-of-state tuition. CollegeBoard’s annual study ( ) gives the current average annual tuitions at $5,132 for public in-state, $12,423 for public out-of-state, and $20,082 for private. Your first objective should be to align your savings goals with the target college cost.

Tuition isn’t the only expense. For every dollar spent at an in-state college, only 35 cents goes toward tuition. Forty-three cents goes to room and board and the extra 22 cents covers books, supplies, transportation and other costs. This year, among public universities these extra costs bumped the $5,132 annual in-state tuition to a total cost of $14,640.

Saving for college requires time and money. The more of each, the better. Time puts the miracle of compound interest on your side. And the more money that is earning money, the less you need to continue contributing.

There is no such thing as saving too early. Some of our clients have started 529 plans before the children are even born! Saving early can cut the cost of college in half. Imagine trying to pay a $70,000 tuition bill to cover the cost of 4 years at the University of Virginia. The earlier you start, the more manageable the monthly amount that should be saved.

Monthly Savings for UVa In-State
Tuition Only Total Costs
Newborn $172 $391
1st Grade $252 $573
6th Grade $412 $937
9th Grade $679 $1,543
11th Grade $1,261 $2,866


Saving early allows you to buy your education at a discount. After saving $172 a month for 18 years, the newborn’s college savings account will have grown to $72,375 of which $35,200 came through the magic of compound interest. Those with the money upfront could deposit $20,000 and let compound interest generate the remaining $52,374. Buying a college education for a 72% discount while receiving several years of tax deductions is a deal those with money should not pass up!

If you cannot invest a large sum now, save a little every day. Started young enough, even a couple of dollars a day will pay the tuition at many public schools. By investing in a college savings plan, your money can grow faster than the inflation rate of higher education. Higher education costs have been rising at a rate of 5%, and over the past ten years tuition at public schools has gone up over 50%. If you are not saving for college you are falling behind.

Saving for college is a critical part of financial planning. But while saving for college is important, saving for retirement is essential. You can borrow money for college but not for retirement; therefore your savings plan should be prioritized based on your specific situation. Seek a professional advisor who will sit on your side of the table and help you determine where your savings will make the most progress toward meeting your financial goals.

Photo by Julie Johnson on Unsplash

See also:
  1. College Savings Part 1 – A College Degree is Worth a Million Bucks
  2. College Savings Part 2 – Start College Savings the Day They Are Born
  3. College Savings Part 3 – Joshua and the Wall of College Savings
  4. College Savings Part 4 – 529 Plans: What’s Important?
  5. College Savings Part 5 – Prepaid Tuition Programs May Be Fool’s Gold
  6. College Savings Part 6 – Tackling college costs at the eleventh hour
Follow David John Marotta:

President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.