College Savings Calculator

Two forces move in opposite directions. Your savings compound at whatever your portfolio returns. College prices compound too — historically faster than general inflation, which is why 4–6% is the standard planning range. The question is which curve is steeper over your particular timeline.

Take the calculator's defaults: a 5-year-old, $5,000 already saved, $250/month, a 6% return, and a school that costs $30,000 a year today. Thirteen years of saving produces about $69,700. But by the time that child enrolls, one year costs roughly $56,600 and the full four years run about $243,800. You've covered 29% of the bill. Closing the rest would take $989/month from today.

That number stops most people cold, and it should — because the honest conclusion isn't “save $990/month.” It's that full funding is a stretch goal, not a baseline. Very few families pay sticker price. Grants, scholarships, in-state tuition, work during school, and a reasonable amount of student debt all fill the gap. A 529 that covers half the cost has done its job: it turns a six-figure loan into a manageable one.

What you can't buy back is time. At 6%, $250/month starting at birth reaches about $96,800 by age 18 — you contributed $54,000 and growth supplied the other $42,800. Start the same $250/month when the child turns 8 and you end up near $41,000. Eight years of delay costs more than half the balance, because the earliest dollars are the ones with the longest runway to compound.

One note on how the projection is built: it compares your balance in the year college starts against the full cost of all four years. That is deliberately conservative. In reality you only withdraw one year at a time, and the untouched remainder keeps growing through graduation — so a plan that looks 80% funded here is usually closer to fully funded in practice.

Both accounts let you set money aside for a child, and they behave nothing alike. A 529 is a purpose-built education account: you keep control, growth is tax-free if the money goes to school, and the beneficiary can be swapped. A UGMA or UTMA custodial account is an irrevocable gift to the child, invested in whatever you like, spendable on anything — including things that have nothing to do with tuition, once the child is old enough to decide.

The financial aid row is the one people underestimate. Assets in the student's name are assessed at 20%, while parental assets — which is how a parent-owned 529 counts — are assessed at a maximum of 5.64%. Moving $50,000 from a custodial account into a parent-owned 529 changes its drag on aid eligibility from roughly $10,000 to roughly $2,800.

The old objection to 529s — “what if she doesn't go?” — has mostly been legislated away. You can change the beneficiary to a sibling, a cousin, or yourself; spend it at trade schools and apprenticeship programs; put up to $10,000 a year toward K–12 tuition; and apply up to $10,000 lifetime to student loans. SECURE 2.0 added the cleanest escape hatch: up to $35,000lifetime can be rolled into the beneficiary's Roth IRA once the 529 has been open at least 15 years, subject to the annual Roth contribution limit.

Use a 529 for money you are confident is for education. Use a UGMA/UTMAwhen you want the child to have unrestricted assets — a car, a business, a down payment — and you accept that at 18 or 21 the decision stops being yours. Most families who split the difference are better served by funding the 529 first and keeping the flexible money in their own taxable account, where it stays out of the aid formula's harshest bracket.

College savings is not the first dollar you should invest. It's roughly the fourth. Fund an emergency fund, capture your full employer 401(k) match, clear high-interest debt, and stay on pace for retirement before a dollar goes into a 529.

The reasoning is blunt: your child can borrow for college at subsidized rates, and no one will lend you money to retire. A parent who funds a 529 at the expense of their own retirement often ends up dependent on the very child the account was meant to help. Model the trade-off — run your retirement number first, then see what surplus is genuinely available. If there is one, the investment growth calculator shows what that surplus becomes over an 18-year horizon.

Once you are contributing, the levers are the ordinary ones. Automate the deposit on payday. Redirect the money that used to go to daycare when it ends. Ask relatives to send birthday contributions to the 529 instead of toys. Check whether your state gives a tax deduction for contributions — if it does, using your own state's plan may be worth more than chasing a marginally lower expense ratio elsewhere.