Financial planning

The early bird gets the advantage, and other tips for college savings

May 20, 2022

Early savers may see significant gains
Starting early can keep a plan manageable
Three charts arranged horizontally show projected savings rates across income levels, grouped by a child’s age when college saving begins: newborn (left chart), 5 years old (center chart), or 10 years old (right chart). The y-axis represents the savings rate as a percentage of income and applies to all three charts. Each chart has its own x-axis, which represents household income when parents are 30 years old. Income ranges from $25,000 to $300,000 and is presented in increments of $25,000 across each x-axis for a total of 11 data points.  Alt text for left chart: Left chart shows that for parents who start saving when their child is born, the projected savings rates range is 1.1% to 6.4% if their household income at age 30 is $50,000, 2.5% to 4.3% if it is $75,000, 3.2% to 3.2% if it is $100,000, 2.6% to 3.6% if it is $125,000, 2.1% to 3.8% if it is $150,000, 1.8% to 3.9% if it is $175,000, 1.6% to 4.0% if it is $200,000, 1.4% to 4.0% if it is $225,000, 1.3% to 3.6% if it is $250,000, 1.2% to 3.3% if it is $275,000, and 1.1% to 3.0% if it is $300,000.  Alt text for center chart: Center chart shows that for parents who start saving when their child is 5, the projected savings rates range is 1.9% to 10.6% if their household income at age 30 is $50,000, 4.0% to 7.1% if it is $75,000, 5.3% to 5.3% if it is $100,000, 4.2% to 5.9% if it is $125,000, 3.5% to 6.2% if it is $150,000, 3.0% to 6.5% if it is $175,000, 2.6% to 6.7% if it is $200,000, 2.4% to 6.6% if it is $225,000, 2.1% to 5.9% if it is $250,000,  1.9% to 5.4% it is $275,000, and 1.8% to 4.9% if it is $300,000.   Alt text for right chart: Right chart shows that for parents who start saving when their child is 10, the projected savings rates range is 3.2% to 18.3% if their household income at age 30 is $50,000, 7.0% to 12.2% if it is $75,000, 9.2% to 9.2% if it is $100,000,7.3% to 10.2% if it is $125,000, 6.1% to 10.8% if it is $150,000, 5.2% to 11.2% if it is $175,000, 4.6% to 11.5% if it is $200,000, 4.1% to 11.4% if it is $225,000, 3.7% to 10.3% if it is $250,000, and 3.3% to 9.3% if it is $275,000, and 3.1% to 8.6% if it is $300,000.
Make college savings part of a broader financial plan
Know the difference between “sticker price” and net price
Depending on type of school and family income and assets, the gap between listed total pricing and net pricing can be quite wide
Violin chart presents average listed total pricing and average net pricing by school type and selectivity. The x-axis represents the school type. The y-axis represents the annual cost of attendance. Listed total pricing exceeds net pricing for each category where data exists. For very selective private schools, the listed total price range is $14,100 to $86,257 with a median of $74,488; the net price range is $4,938 to $47,413 with a median of $27,190. For selective private schools, the listed total price range is $3,401 to $77,400 with a median of $47,584; the net price range is $1,488 to $58,297 with a median of $23,026. For non-selective private schools, the listed total price range is $12,033 to $74,264 with a median of $44,464; the net price range is $4,999 to $41,217 with a median of $23,182. For selective public out-of-state schools, the listed total price range is from $5,050 to $70,937 with a median of $38,388. There is no net pricing. For selective public in-state schools, the listed total price range is $5,050 to $47,681 with a median of $26,364, while the net price range is $2,958 to $27,675 with a median of $14,360. For non-selective public out-of-state schools, the listed total price range is $20,994 to $56,852 with a median of $35,298. There is no net pricing. For non-selective public in-state schools, the listed total price range is $18,255 to $33,718 with a median of $24,806, while the net price range is $3,637 to $21,631 with a median of $14,326.
Assess progress—and goals—on a regular basis
Consider which financial resources to tap—and in what order

Contributors

Clifford Felton
Jonathan Kahler
Vanguard Insights

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