Well, it's back to school time and if you're a parent, you're keenly aware of the expenses associated with it.  The clothes, school supplies, expenses for various classes that are not covered with the tuition that you have to pay and accessories can really sting...financially speaking.

Well, as bad as it seems, enjoy it while it lasts because the costs for Elementary, Junior High and High school don't hold a candle to the costs associated with College.

It's easy to get intimidated at the price of college.  These days it's hard enough to cover the bills, set aside an emergency fund and save for retirement, much less set money aside for college.

The New York Times reported in 2010, more than half of all public undergraduate college students pay less than $9000 a year for expenses and fees.  At the other end of the spectrum, private four-year colleges run about $35,000 a year for tuition and fees.  However, the higher priced colleges often have bigger endowments and have more grant aid available.

Because of grants and various financial aid, public four-year colleges run about $7020 a year for tuition and fees as long as they are attending a college in their state.  An average surcharge for out-of-state students runs about $11,528. Private four-year colleges will run you on average $26,273 per year and a public two-year college averages around $2544 per year.

Of course, there are a lot of other expenses to be ready for.  Housing, food, books, supplies and laundry all have to be paid for.

Fidelity first estimated what the expenses of four years of in-state public and private college would be 18 years from now for a parent with a brand-new baby today. It utilized data from the College Board about the average cost of public and private colleges today,  and forecast how much those costs are growing annually. These calculations assume a 5.4 percent annual growth rate in costs for the next 18 years.

Using Sallie Mae data, Fidelity estimated how much in scholarships, grants and family gifts households currently making $55,000, $75,000 and $100,000 annually could expect to receive and subtracted that amount out from the expected cost. It estimated how much parents at each of those income levels would need to save to cover future college costs, assuming they would put the money in a 529 plan that provided a return in line with what the company estimates an investment in Fidelity’s age-based investment option would deliver.

According to Fidelity, a family making $55,000 would need to save  $48,000 to cover the qualified expenses of a public university and $107,000 to cover such costs for a private one. So, starting now,  they need to start saving $160 a month for a public college and $410 a month for a private one.

A family making $75,000 would need to save $51,000 total, or $190 a month, for a public university and $115,000 total, or $410 monthly, for a private one.

A family making $100,000 would need to save $55,000, or $250 a month, for a public university and $123,000, or $460 monthly, for a private one.

OK, that's the long and short of it.  More information is available on Fidelity Investment's website.

There's two 'schools' of thought on this.  (Actually there are a lot of perspectives, I'm only going to address a couple)

I've talked to parents that say they don't want to have to pitch in a penny towards their children's college education.  “That way they'll learn the value of money” the parents would say.  “That's the only way they will appreciate the value of the education.” or “They'll have to work their way through college, just like I did.”

Other parents make a college fund a huge priority.  “I want my children to have the education that I never had” they'll say.  “We want our children to have all the opportunity available that we can provide.” I had a brother-in-law who would not consider having each of his children until he had the money set aside for college before they were born.  He had three children.  

Both of these mind-frames are right...it's just a matter of opinion.

While watching the kids going back to school for the past couple of days, I got to thinking... it's never too early to start talking this over with your spouse about what you're up against...and what you're going to do about it.



Peace and Success,



Kevin Halper