How much you should save depends on how much you want to contribute to the education costs. For example, 4 years of instate tuition cost about $72,000 today. The average inflation on tuition has been about 5% per year. If your goal is to pay for 100% of her tuition in 8 years that comes out to about $106,000! In order to save that much, you’d need to put aside almost $11,000 each year in an account earning a 6% return. That assumes she doesn’t qualify for any grants or scholarships. Saving $11,000 a year can seem daunting, but saving anything today will mean she has something for tomorrow.
A reasonable amount to save is the amount over what you need to save for your retirement. Starting small and early will get you partway there. You don’t need to save for 100% of the education, you might want to, but, when it comes to retirement vs. education, she’ll be able to get an education loan, you can’t get a retirement loan...
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