How the calculation works
- Future cost: today’s annual cost is grown by college-cost inflation to each year your child will be enrolled, then multiplied by the share you plan to cover.
- Amount needed at enrollment: money for later college years can stay invested, so each year’s cost is discounted back to the first day of college at your investment return.
- Monthly savings: after subtracting what your current savings will grow to, the remaining gap is spread over the months until college with the future-value-of-annuity formula.
Example
For a 3-year-old, with college at $30,000 a year today, 4% cost inflation, a 6% return and $5,000 already saved, four years of college are projected to cost about $229,000. Saving about $690 a month for 15 years covers it.
Ways to save for college
- 529 plans: growth is tax-free when used for qualified education expenses, and many states give a tax deduction for contributions. Unused money can, within limits, be rolled into the beneficiary’s Roth IRA.
- Coverdell ESAs: tax-free growth with more investment choices, but a $2,000 yearly contribution limit and income restrictions.
- Roth IRA: contributions can be withdrawn any time, which gives flexibility if the money isn’t needed for school.
You don’t have to cover 100%. Scholarships, grants, work-study and student earnings often fill part of the gap — use the “share you plan to cover” field to plan for that.
Related Education & Wealth Accumulation Tools
Funding higher education requires compounding returns to outpace aggressive tuition inflation. Model tax-advantaged 529 portfolio trajectories with our Compound Interest Calculator, set automated monthly sinking fund deposits via the Savings Calculator, evaluate diversified asset allocations with the Investment Calculator, and assess purchasing power loss using our Inflation Calculator.
Frequently asked questions
How fast does college cost rise?
Published tuition has historically grown faster than general inflation; many planners assume 3–5% a year. Net price after aid has risen more slowly in recent years.
Does a 529 plan hurt financial aid?
A parent-owned 529 is counted as a parent asset on the FAFSA, which is assessed at a maximum of about 5.64% — much less than student-owned assets.
What if my child doesn't go to college?
You can change the 529 beneficiary to another family member, use it for trade school or apprenticeships, roll up to $35,000 (lifetime) into the beneficiary's Roth IRA if the plan is 15+ years old, or withdraw it and pay tax plus a 10% penalty on the earnings.