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December 13, 2019

3 Steps to Determine a College Savings Goal

There is a time when every parent thinks about how they are going to pay for college.  For some, it starts at birth.  For others, a middle school project on career paths, begins the conversation.  Others, one day wake up with a high school student and think, “Oh my gosh, my baby is going to college in only a few years.”  Wherever you are in this timeline, take a few steps to look at college costs, decide what you can set aside, and create the best tool for college savings.

1. Know College Costs

If you want to know some general information about college costs, the College Board creates an annual report that includes the average sticker price and net price for public and private 4-year colleges and universities.

2019-20 Average College Costs


Type Average Sticker Price Estimated 4-Year Sticker Price* Average Net Price Estimated 4-Year Net Price
Public 4-year Institution $21,950 $91,968 $15,380 $64,440
Private Nonprofit Institution $49,870 $208,949 $27,370 $114,677

* Assumes a 3.1% increase based on the College Board’s Trends in College Pricing.

Quatro is all about educating families about college costs.  Our free paying for college calculator lets you pick from a list of over 2,000 colleges to understand college costs for the entire 4-years.  If you are early on in the planning experience, check into the public universities in your state of residence as well as some private nonprofit institutions that you think will fit your kid’s interests.  Plus, you can refine the results to find the income-based net price for many colleges.

2. Decide How Much to Save from Your Income

When there is a big number to save, it can be daunting.  Break it down into chunks makes it doable.  Most financial experts suggest creating a monthly goal so that you can easily set aside the money.  The Lumina Foundation, a nonprofit focused on postsecondary student success, suggests the Rule of 10.  Parents are encouraged to set aside 10% of their discretionary income for 10 years.  That is 10% of your income remaining after deduction of taxes, other mandatory charges, and expenditure on necessary items.   

The Lumina Foundation is all about college success for all - no matter what your income level.  If your family’s income is below 200 percent of the poverty rate, then they don’t recommend saving at all because you need all those funds for everyday expenses.  Currently, the U.S. Federal Poverty Guidelines for a household size of four is $25,750, so those earning less than $51,500 or less are exempt from this rule.  

For a family with a household income of $100,000, Lumina Foundation calculates a savings estimate of $429 per month. Remember that the Rule of 10 is just a suggestion.  Yes, there is sound logic based on the US Bureau of Labor Statistics Consumer Expenditure Survey and teh poverty guidelines created annually by the Department of Health and Human Services (HHS).   

Since everyone’s discretionary income may be different, take the time now to look at your income and monthly expenses to determine your amount.  Plus, make certain you reexamine your contributions as your income increases with raises and bonuses or decreases with changes in employment.

3.  Set up a College Savings Account

Most experts suggest that you have an account that is specifically created for college savings.  Plus, there are a set of accounts called 529 Plans which have great tax advantages.  The earnings from 529 plans will not be taxed if used for qualified educational expenses and investment growth is tax-free.  Using BankRate Return on Investment Calculator, if your 529 plan rate of return was 6% and you set a monthly contribution of $429, then you could earn an additional $15,355 in earns to your $51,480 10 year savings.

Some families set up traditional savings account to hold college savings.  According to BankRate in December 2019 data, there are several banks that have a 2.05% rates for online savings accounts.  If your savings account rate of return was 2.05% and you set a monthly contribution of $429, then you could earn an additional $4,754 in earns to your $51,480 10 year savings.

Whichever mechanism you choose to save, consider setting up an automatic deposit from your checking account monthly.  This helps your family to stay on target for your college savings goal.

Final Thoughts

Remember your kids can contribute too.  Encourage them to save a portion of their cash gifts and earnings for college savings.  Plus, the Lumina Foundation’s Rule of 10 includes that students should contribute from working 10 hours a week while in college.  Based on minimum wage, your kid could work 10 hours of work for 50 weeks and earn  $3,625 annually ($14,500 over the four years) to pay for college costs. In fact, if they are working before going to college, they may even be able to contribute more.

Photograph of Colleen Krumwiede
Colleen Krumwiede
Co-Founder & Chief Revenue Officer

Colleen MacDonald Krumwiede is a financial aid expert with over a decade of financial aid experience at Stanford GSB, Caltech, and Pomona College and another decade at educational finance and technology companies servicing higher education.  She guides go-to-market strategy and product development at Quatromoney to transform the way families afford college.


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