TIPS AND TRICKS

How Much Do You Need to Save in a 529 Account?
Tuition inflation rates vary depending on who’s calculating them. But tuition tends to increase about 5% annually. (It increased one-percent during the pandemic, but experts say that’s unusual.)

Still, how much savings you need to build in a 529 plan depends on your goal, says an independent financial aid expert. Are you looking to pay full freight for your child’s college education costs, or only pay for a portion? Defining what your savings goal is when your child is born can help you determine precisely how much to contribute to their 529 every month to reach your goal.

Typically, per Kantrowitz, parents pay for a third of their kid’s college costs using savings, with the remainder coming from their income and student loans (taken out by either the parents or the child). Because college costs roughly triple over any 17-year period, Kantrowitz says your savings goal should be the full cost of a college education the year that your child is born.

So, if your kid was born in 2021 and they plan on attending a private university, the total cost for four years would be $165,644.

Here’s some more to keep in mind about your 529