Over the past year alone, the average balance of a family’s college fund has increased a whopping 30%. This might sound like good news, but it turns out we shouldn’t feel quite so positive.
U.S. News & World Report took a closer look at the numbers and found that Americans’ college savings aren’t keeping up with the rising cost of tuition.
Consider the cost of an in-state public college: about $8,893 for the 2013 to 2014 academic year, according to the College Board. The average family’s savings (about $15,346, according to a report by student lender Sallie Mae) won’t even cover two years of education.
These numbers don’t even include the cost of room and board, textbooks and other expenses. And if your child attends a private school, the total cost of a college education nearly doubles.
So how can parents save more for college?
Opening a 529 account is a good first step, though it’s easy to be overwhelmed by the notion of what higher education will cost by the time your kid is college-bound. Be realistic about your target savings amount, and recognize that staying in-state may be a more viable goal than shooting for the Ivy League. No matter where your kids apply, look for grants, and fill out that FAFSA form—you might be pleasantly surprised by the results. If your child can demonstrate promising academic success or accomplishments, consider applying for scholarships as well.
If your kid is just outgrowing diapers and daycare, think about allocating the money you’ve been spending on early child care costs toward a college savings account. And when he starts tutoring, babysitting, or even just receiving birthday checks, explain how he can put money toward his future.
As average student loan debt approaches $30,000, is the cost of college worth it in the long run? Many experts say it is. Compared to high school graduates, bachelor’s degree holders earn about $1.2 million more over their lifetime, and graduates with associate’s degrees will earn around $325,000 more. But be careful about sacrificing your other financial goals: Your child can always take out student loans, but it’s difficult to make up for years of lost retirement savings.