My son is on his way to college and I am a proud, proud father. Of course before I get too excited my little guy is only five-months old but since I have dedicated my career to higher education I am already thinking about him heading off to college. What will he study? What school will he attend? How will we pay for it? Will he want to go to an ‘elite’ school? Will he want to go to a football school? Will he go to the local community college? Will he need to know Spanish by the time he enters college? Will he even go to college? What will higher education look like in 2031?
There are far too many unknowns 18 years in the future so in the meantime my family will do the only thing possible at this point, start saving. But how much do we save for college? In my attempt to figure this out, I went to FINRA, the Financial Industry Regulatory Authority and used their college savings calculator.
To save for college in 2031, I used the following variables:
- $25,000 in today’s dollars for one year of college;
- 18 years until enrollment;
- 4.5% annual return;
- 3% annual inflation rate;
- 4 years for an undergraduate degree.
By the time my son enrolls in college in 2031 the annual cost will have risen, according to FINRA from $25,000 to $42,500 in 2031. This calculator states we will need to save $5,237 per year, or $436 per month. If we have another child, we will need to double this number to $876 per month and if our children (one real and one hypothetical) want to attend an ‘elite’ school we need to double our savings again to $1,752 per month.
Where to start? Saving $436 per month for one child is ‘doable’. I say this because I have steady employment and my wife has an extremely flexible, in-demand job. But here is the kicker: I do not know what is going to happen over the next 18 years. Consider the following:
- Will I still be with my current employer?
- Will my career continue to advance?
- Will I get reasonable/modest pay raises?
- How will my retirement perform?
- Will I get laid-off and have to start over?
- Will we have to move to a different state for some reason?
- Will my family have any medical emergencies?
- Will my family have any unexpected expenses?
- Should we send our son (our children) to private primary and secondary school?
In addition to the above: my wife and I have college loan debt; I will need a new(ish) car once every five to eight years (this is a must living in Arizona); and we want to take modest family vacations once in awhile to stay sane and have a little fun.
With the above unknowns I go back to the original action plan; we better start saving. The only thing I can do is my best at work, make good decisions for myself, and with my wife as my sidekick (and me as her’s), make the best possible choices for our family.
Everything else is having a little faith that life will work out over the next 18 years.
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