Thinking about 529 plans and like playing around with interactive calculators? This helps you visualize how much you’ll need to save for college and how changing up a specific factor would affect your results. It adjusts for age, contributions, investment returns, tuition inflation, and even looks up the current cost of your favorite university. A formal report is spit out with lots of charts, just like a financial advisor might create for you. Here’s a sample screenshot:
Tuition inflation is something that I think is hard to predict. However, I couldn’t think of anything better than accepting the default assumptions that investment return will only barely outpace tuition inflation.
If you’d rather have a quick, simple scenario, check out this on the power of automatic savings. If you put away $130 a month automatically every month for 18 years, at a 6% return you’d end up with $50,000. Putting away $50 a month reliably would get you to $20,000.
Nearly half of your final amount would be due to investment growth, which thanks to the 529 plan can be tax-free when used towards qualified educational expenses.
I’m still in the camp that retirement should be prioritized over college savings, but I definitely understand the parental instinct to provide the best educational opportunity possible. I’m still pondering the idea of targeting funding college with 1/3rd savings, 1/3rd spending from current income, and 1/3rd grants/scholarships/loans.
Finally, here is another set of handy Vanguard tools, a .
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