How Much Should You Have In A 529 Plan By Age

How much you should be saving for college for your child? It's one of the biggest questions we get asked almost everyday. How much should we have in a 529 plan? How much should we save for college? How much do we need to worry about this? And the answer is tough - it depends. 

The idea of a 529 College Savings Plan is great: you can contribute money into an account and it will grow tax free to someday pay for your child's education. And you can contribute a lot of money too (up to $300,000 in most states). That's not where the trouble arises.

The real trouble comes from rising tuition costs and how much every "college savings calculator" says you need to save for your child's education. According to The College Board, the average cost of a public 4-year college in 2020-2021 was $10,740 for in-state tuition. The average cost for a private college was $38,070.

When you start plugging those numbers into the college savings calculator, suddenly you're supposed to start saving over $500 per month for your child. Then, add that into your own savings for retirement, and you're not going to have anything left for yourself each month!

So let's dive in and see how much you should have in a 529 plan.

Follow The Order Of Operations For Saving For College

That single amount gives me sticker shock each month when I think about saving for my child's college education. But it's also an important reminder of why everyone should follow the Order of Operations For Saving For Your Kid's College.

The key phrase is Y.E.S.:

(Y) YOU: You have to make sure your own financial house is in order before you try to save for your child's college. If you can't make rent, or buy groceries, there are bigger issues to fix first. However, the YOU bucket also includes saving for your own retirement and making sure you have an emergency fund. I've said this hundreds of times - you can't get a loan for retirement. Make sure you save for yourself first.

(E) Education Savings Accounts: If you've saved for yourself, next you can save for your child in Education Savings Accounts, like the 529 Plan. 

(S) Savings: After contributing some amount to the 529 plan or other education savings account, it's smart to save in a traditional savings account as well, in case there are other expenses you want to help your child with that don't qualify as education expenses.

How Much You Really Need To Save In A 529 Plan

Part 2 of that "scary" number that you need to save each month for your child's college is that number is based on saving 100% of their college costs. As a parent, you don't need to pay for 100% of their school. Or, maybe you'll pay for 100% of their public in-state tuition, and the rest is up to them. Or maybe you'll just have a target savings number, and the rest is up to them.

It's simply important to remember that you don't have to save and pay for all their college. It's THEIR college - not yours. Plus, there are tons of ways for them to find help paying for school, from finding scholarships, to getting student loans. 

Here's our guide on how to pay for college.

So, instead of stressing out about saving $500 per month, I'm going to make the following assumptions and save based on that:

• I'm going to save for an in-state college that currently costs $10,200 per year
• I will contribute to all 4 years of college
• I will pay 50% of the projected college costs
• I'm done contributing to the 529 plan when my child is 18 (sorry, but you're out of the house now!)
• I expect college costs to continue to increase by 4% per year
• I expect to get 6% per year return on my investments in my 529 plan

With these assumptions, you should be saving about $96 per month for your child's college, or $1,151 per year. Let's see how that breaks down.

However, if you're on the high end, and want to contribute to pay 100% of your child's education expenses at a 4 year private college, I included that in the chart below too (for reference it means contributing $630 per month).

If you want better estimates, check out our 529 Plan Guide By State, find your state, and see what the costs to go to college are in your specific state.

How Much You Should Have In Your 529 At Different Ages

529 College Savings Plan Guidelines

From the results, we can conclude that the goal for most people saving for college should be to have between $37,328 and $245,427 saved in the account. This is a huge range, no doubt. But remember what "low end" and "high end" mean.

The low end amount is for someone that wants to help their child pay for a public 4-year school. The high end amount is for someone that wants to fully pay for a 4-year private education for their child.

Parents should also remember that, even when saving for private school, many students who attend private schools get discounted tuition, or receive scholarships to offset the "real" tuition price. So, even that high end number might not make sense when saving for college.

In this scenario, the low end 529 plan will be able to pay out between $9,600 and $10,000 per year, for each of the 4 years of school. Given that the college costs will rise, that should be about 50% of a 4-year public school tuition in 18 years.

Where To Open A 529 Plan

What many people don't realize is that you can invest in almost any state 529 plan. For some people, it can make sense to use your own state's plan to take advantage of the tax deduction - but not all states offer tax deductions on contributions (notably California).

If the state doesn't matter, the next things to look at are performance and ease of saving. For performance, you want good performance for low fees. For ease of savings, we look at whether the plan can be connected to savings programs like Backer.

Check out this guide here, find your state, and see what plan we recommend: 529 Plan Guide.

SavingForCollege.com ranks the best plans every year. What plan you choose depends on the state you're in. Check out the map below and find your state: