Do you want to help your child financially with college? My wife and I definitely do, but we had two problems:
- We had no idea how much college tuition would be 18 years from now
- 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!
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:
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:
- You’ll find out that you’re on track
- You’ll discover you’re a little behind and need to pick up the pace
- 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.
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:
- The cost of college will increase by 5% each year
- Investments will rise at the rate of 7% each year
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.