Planning for the Cost of Higher Education

One of the best investments you can make for your children is an investment in their educational future.

According to 2006 data from The College Board and Standard & Poor's, the projected average cost for your newborn's four-year degree at a public college could total over $125,000. You would have to sock away $4,232 per year in a savings account, assuming it earns interest at an average rate of 5% per year, to equal that amount by his or her freshman year. And should your child decide to attend a private college, tack on about $175,000 more to your savings goal, bringing your savings account annual contribution to $8,464.

Although daunting, it's not impossible. A sound investment strategy, coupled with knowledge of other college financing options, will help get you there.


Assumes 5% annual increase and current 1-year cost
of 4-year public ($13,589) and 4-year private ($32,307).

A Sound Strategy

As with any large savings goal, it's best to start investing early and often for college. First, set your goal: Sit down with your financial advisor and figure out how much you will need to save for each child based on his or her age. Then, develop an investment plan and stick with it.

Sources: Education Pays, 2007, The College Board; Standard & Poor's. Performance is for the period January 1, 1988, to December 31, 2007. Figures include tuition, fees, and room and board. Standard & Poor's Composite Index of 500 Stocks is an unmanaged index generally considered representative of the U.S. large-cap stock market. Money market accounts are represented by the returns of 3-month Treasury bills. Past performance cannot guarantee future results. Individuals cannot invest directly in any index. Results include reinvested dividends. Keep in mind that unlike investments, which involve risk and possible loss of principal, bank savings accounts are FDIC-insured.


© 2008, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
Re-published with permission.