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Aww, your precious bundle of joy has arrived and your heart bursts with love. It might not be the only thing with a bursting sensation – your wallet may, too. If only that tree you and daddy sat in k-i-s-s-i-n-g was the exception to the growing money rule. Yes, the number of diapers baby Harper goes through is normal. No, it’s not likely that you will get her potty trained within six months. While new baby expenses are definitely a shock to the wallet, the big expense that may be keeping you up at night is college – and for good reason. Here’s why:
The annual cost of a 4-year public college in 2014-2015 is $23,410 and for a private institution, $46,242 (in-state tuition assumed). That’s tough even today if you have an 18 year old, but if your child is a newborn and costs go up by 4% a year, the total cost could be $200k for public school and $400k for private! So how much should you be saving? If you plan to fully fund college:
Even on a monthly basis, these numbers can be scary, particularly when you have other goals (i.e., not working forever). Consider saving to a 529 Plan to help make this goal more attainable and keep in mind that many families do not expect to cover 100% of college costs. Grants, scholarships, and loans can help ease this burden.
Determine how much you would like to cover (or can afford) and use savingforcollege.com’s calculator to develop your ideal savings target. And, please, let us know if you find that money tree!