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Saving Early for a College Education

Being able to afford to send your children to the colleges of their choice, without being limited by cost, can be one of the great joys of being a parent.

But, attending college is expensive. According to one recent survey, the average annual cost for tuition, books, fees and room and board was over $9,000 at public universities, and over $24,000 at private colleges. And costs continue to rise. Over the past decade, the costs of getting a college degree have gone up about 6 1/2% per year on average. If this trend continues, and all indications are that it will, the cost for a year of college will double in 12 years and triple in 19 years. And remember, increasing numbers of students are spending more than four years in college.

One of the keys to accumulating the money needed to send your child to college is to start saving early. Let us use an example of a seven year old who will attend a state university as an out-of-state student. The estimated total current cost of a year at that university is about $14,100. By the time she is ready to start college, she needs to have accumulated over $120,000.

Let us assume her funds earn 8%. If her parents had started at age three, they would have needed to save about $3,700 per year. If they start at age seven, their annual savings need to be $5,900. Starting at age 10, they will need to save $8,900 per year. And starting at age 13, they will need to save over $15,000 per year. Starting to save for that college education as early as possible makes a big difference. And the decision of when to start is up to you.

Annual Savings Needed
To fund today's 7 year old child's college education.

If you start at:
Annual savings needed
Age 3
Age 7
Age 10
Age 13

Starting to save early not only enables you to spread your saving over a longer period of time, but you also get the benefit of the earnings on the funds for a longer period.

The prospects of college costs coming down are probably slim to nonexistent. Make college easier to afford by starting to save earlier.