Free College Investment Calculator: It Costs More Than You Think

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Do you want to help your child financially with college? My wife and I definitely do, but we had two problems:

  1. We had no idea how much college tuition would be 18 years from now
  2. We didn’t know how much we should invest monthly to fund that amount

If you’re not a Financial Advisor or a Financial Aid Counselor, then I suspect you’ve got the same issues, which is exactly why I dug through the details, put together an Excel spreadsheet, and developed a tool that will help every single parent calculate the cost of college!

Download the Free College Investment Calculator here

Free College Investment Calculator

Before you plunk in your numbers, let me tell you… it’s going to be more than you think. That was my experience anyway.

Our daughter Addi is 6 months old. We opened a 529 fund a couple of months ago and currently have $350 in it. Obviously I didn’t fool myself into thinking this was going to be enough to fund her entire college education 18 years from now, but I didn’t think I’d already be so far behind!

According to my calculations, we should be contributing $291 a month to fully fund her college expenses (which are $121,000 in total!)! Yikes!!

How to Use the Tool

I tried to make the tool as simple as possible to use.

All you have to do is enter:

  • your child’s age
  • the amount you already have saved
  • the current yearly tuition costs
  • the percent of the tuition that you’d like to cover for your child

Check out the screenshot of the tool below:

Free College Investment Calculator

As you can see in the above screenshot, we entered in our real life numbers to see what we should be putting away for investments each month. Addi is 0.5 years old, we have $350 saved in her 529 account, the state college in our area costs $12,000 per year today, and we are toying around with the idea of paying just 50% of her college tuition and letting her come up with the other 50% (you know…so she’s a bit more responsible…hopefully).

With these entries, the total future cost of college comes to $121,474, which equates to a $144 monthly investment for the next 17.5 years to get there – for a half contribution. For a full contribution, the tool says we’d need to invest $291 a month.

It’s not the answer I was hoping for, but the tool works great at least!

What Your Number Might Tell You

When you enter your numbers in the free college investment calculator, you’ll find yourself in one of three categories:

  1. You’ll find out that you’re on track
  2. You’ll discover you’re a little behind and need to pick up the pace
  3. Annd, crap…you don’t have a prayer to save up the amount that you wanted

If you’re in boat #1 or #2, you’ll likely be fine. If you find yourself in boat #3, you probably need some words of wisdom to calm yourself down.

I’ll do my best.

1) Be Honest

Promising the world to your child doesn’t do a bit of good when you know you’ll end up failing them in the end. Be honest with your kids and let them know that you probably won’t be able to help with the cost of college. They might be crushed, but at least it will give them a chance to take action and fund their own way.

2) Have Them Fill Out the FAFSA

If you don’t make a ton of money, then there might be some free grants with your kid’s name on them. Filling out the FAFSA takes hours and might be totally worth it if you get $2,500 in grants, but if you want a quick taste at the aid you might qualify for, try the FAFSA 4Caster.

3) Have Your Child Apply to Every Scholarship Under the Sun

If you know that you won’t be able to pay for your kid’s college education, push them to apply for scholarships like their life depends on it…..because it pretty much does.

Kristina Ellis is the poster child for what’s possible. Believe it or not, but she has earned over $500,000 in college scholarships. The keys? Good grades, positions of leadership in high school, and a TON of volunteer service hours.

4) Encourage Them to Go to the Local University

Do you know what it costs to go to the University of Michigan if you live in the state? $13,486.

And if you live out of the state? $41,906.

Whoa.

If you want your kid to get an education even if you can’t help him financially, encourage them to stay in the state to save a TON of money. And, if that’s even too expensive, have them go to the local community college for the first two years for an even lower price tag. They can always transfer to the larger university for their junior and senior year.

Get That Kid’s Butt to College

Don’t let the tool discourage you, let it guide you to immediate action. Sure, you might be behind the mark with little hope of catching up, but there are always other options!

As a recap:

  • Let your kid’s know if you’re helping or not
  • Have them check out the FAFSA for federal aid
  • Have them fill out scholarships like it were their full-time job
  • Stick with the local universities to keep expenses down

It’s not a guarantee that your kids will be a success if they go to college, but it certainly gives them a better chance. Do everything you can to get them there.

Enjoy the tool, and feel free to share it with your friends!

Assumptions of the free college investment tool:

  1. The cost of college will increase by 5% each year
  2. Investments will rise at the rate of 7% each year
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9 comments to Free College Investment Calculator: It Costs More Than You Think

  • Dottie

    Fill out the FAFSA no matter what (well, maybe not if you are making over $200k+ year). It doesn’t take hours anymore (have all your statements handy), it is based on the prior years earnings (new this year), you can fill out the forms starting Oct 1 instead of Jan 1 (new this year). At the end, it will give you a number. Don’t be alarmed. It is what the school will use to compare all the other “numbers” from students and their families. Make yourself aware of the difference between subsidized and unsubsidized loans.

    Having twins, or two in college at the same time, will help with FAFSA awards.

    There are also tax advantages that you may not know about until you do your taxes the first year your child is in college. Tax rules could change by the time your child goes to college, but if you make under a certain income, fully funding the 529 may not be to your advantage.

    What threw us off target was the downturn in the market in 2008-ish. My first was still 4 years from starting college, but the market didn’t recover in time and we lost projected earnings over those years. Note: You should move money into more of a guaranteed earnings fund the closer to the time you need it. You want to make sure your money is there…and won’t go down when you need it most. Unfortunate for us, we moved the college money when our account was down (we didn’t want to loose any more!).

    The second thing that threw us off was the public instate college my second child is now attending raised tuition $3k/year the July before he started. Times 4 years, and that is about another year in tuition.

    Things that will add up that you may not plan for: food, more food, parking passes, computer, extra tuition add-ons for certain business or engineering classes, etc…

  • Saving for college can be a real pain and some people consider it a bad investment. However, the loans required can put your child into a very large hole that will be difficult for them to get out of. Posts like this will hopefully reach an audience that is looking for answers. Thank you.
    Millennial Money recently posted..$45,000 for MillennialMoney.com?

    • Sure MM. My hope is that thousands of people find this post and use the calculator to start funding their child’s education properly! It hasn’t taken off yet, but I’m sure it will!

  • Julie

    I use the calculator on http://www.savingforcollege.com. We have saved quite a bit for both our kids but we still have to contribute a ton every month to pay for college in full. According to their calculations a child who was just born needs to put away over $500 per month to pay college for a four year public university in full-CRAZY!

    • It is crazy, isn’t it?! We immediately put $350 in a fund for Addi before she turned 6 months old. Then I built the calculator to see if we were on track and realized we were already behind!! Sheesh!

      One thing to think about for you though – if you’re saving the money in a college savings fund that can only be used for college, be sure not to over-fund it. Any unused money will be taxed and penalized pretty heavily. We’re going to half-fund the college savings and then we put all additional money into our rental properties which we can use to fund education as well.

  • Julie

    I definitely agree about not over funding college. I have heard that if you have money left over in a 529 plan you could keep it in your child’s name and once they have children, you can simply roll it over into your grandchild’s name. Imagine all of the growth and money in that fund if passed to a grandchild!

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