How Much to Have in a College Savings Account By Age

College can be invaluable, potentially leading to higher lifetime earnings. However, saving for college can be a very long-term goal that you’ll need to check to verify your progress. After all, the cost of college has risen rapidly and savings can help avoid costly student loans. Here is how much you may want to have saved by various ages of a child preparing to attend.

You can also work with a financial advisor who can provide clear guidance on the best avenue for you in order to save enough for your child to attend school. 

The Rising Cost of College

Saving for college has always been important, but the rapid rise in the cost of college has made saving more important than ever. For example, according to Education Data Initiative, the cost of college tuition has increased by more than 700% since 1963, after adjusting for inflation. Between 2010 and 2020 alone, tuition at public 4-year universities increased by 31.4%.

According to FinAid, college tuition increases by about 8% yearly. That is more than double the overall inflation rate of 3.8% in the United States between 1960 to 2021. So, while inflation inevitably makes everything more expensive, inflation alone doesn’t fully explain the rising cost of college. One of the few numbers that have kept pace with college costs in recent history is the S&P 500, which has returned about 11% on average. Thus, it’s important to save money for college and invest it so it can grow over time.

College Savings by Age

The amount you should save for your child’s education depends on many variables, such as their current age and whether they will attend a public or private college. Hence, financial firms like Fidelity and Schwab have calculators to help you estimate how much you’ll need to save based on all those factors.

We’ll assume your child will attend a public, 4-year college with in-state tuition and that you are starting with no college savings. The average cost for college ¹ is $38,270, but we’ll assume that cost will increase by 5% per year. You might need a college savings calculator if your situation is different.

In this example, the “low end” assumes you will cover 50% of the cost of college with savings, while the remaining portion will come from sources like income, grants and loans. The “high end” assumes you will cover the entire cost with savings. Also, note that the table above assumes a college tuition inflation rate of 5% and an average investment return of 4.96%. Of course, either or both figures could end up much different from reality. Therefore, it helps to use a calculator and try different scenarios with different numbers.

Tax-Advantaged College Investing

If you have a young child who you expect will attend college, you can invest the money you save for their education in a college savings account. Two types of accounts are specifically intended for this purpose: 529 savings plans and Coverdell Education Savings Accounts (ESAs). Using one of these accounts for college savings has the dual benefit of tax benefits and compounding interest.

With both accounts, you will owe taxes on contributions, but the money grows tax-free. Likewise, you won’t owe taxes on withdrawals if the money is used for qualifying education expenses. Coverdell ESAs have an annual contribution limit of just $2,000. However, 529 savings accounts have no contribution limit.

While these college savings accounts can be quite useful, they have their limitations. For instance, you only receive the full tax benefits when they are used for qualifying education expenses. There can even be penalties if the money isn’t used for those qualifying expenses. Thus, it can be helpful to also use accounts like a Roth IRA or a high-yield savings account.

How to Save More for College

Saving for college can feel overwhelming, but starting early and staying consistent can make a significant difference. Whether you’re behind on savings or just getting started, there are practical steps you can take to build a stronger college fund over time.

The earlier you begin saving, the more time your money has to grow through compounding. Even small, regular contributions can add up over time. Setting up automatic transfers into a college savings account can help you stay consistent and make saving part of your routine.

Accounts like 529 plans offer tax benefits that can help your savings grow more efficiently. Earnings in these accounts grow tax-free, and withdrawals are typically tax-free when used for qualified education expenses. Taking advantage of these accounts can help maximize your overall savings.

As your income grows, consider increasing your contributions. Allocating a portion of raises, bonuses or windfalls to your college savings can accelerate your progress. Gradual increases can make a meaningful impact without significantly affecting your current budget.

Family members may be willing to contribute to a child’s college fund for birthdays, holidays or special occasions. Directing these gifts into a dedicated savings account can help boost your balance and reduce the overall burden on you.

Bottom Line

Building a college savings account takes time, consistency and a balanced approach. While benchmarks by age can help guide your progress, the most important factors are starting early, using tax-advantaged accounts and increasing contributions when possible. By staying consistent and aligning your savings with your broader financial goals, you can create a strong foundation to help cover future education costs without compromising your overall financial stability.

Tips on Saving for College

• Financial advisors can be valuable sounding boards when planning for college costs. They can help you understand what programs are available and which are best for your situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• With college costs rising faster than inflation, you can use our inflation calculator to get a better estimate of what college costs will be when your child graduates high school.

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