How the college savings calculator works
First, the calculator grows what you've already saved at your return rate until the date you need the money. Whatever is still short of the goal has to come from monthly deposits. It then finds the deposit that closes that gap, using the standard future value formula:
Monthly deposit = Gap × r ÷ ((1 + r)n − 1)
Here r is the yearly return divided by 12 and n is the number of months. Returns compound monthly, and each deposit is made at the end of the month. At a 0% return, the deposit is simply the gap divided by the number of months.
The return you enter is an assumption, not a promise. Savings accounts pay a known rate. Investments like the funds in a 529 plan can rise or fall, and nobody can tell you what they'll earn. Try a low and a high rate to see a range, and plan around the lower one.
Picking a goal
- Start from a college's cost of attendance, then subtract grants you expect. The college cost calculator does this.
- Prices rise over time. The college cost inflation calculator shows what today's price could be when you enroll.
- You don't have to save the whole cost. Many families plan to cover part from savings, part from income during college, and part from scholarships.
Worked example
You want $50,000 saved in 10 years. You have $5,000 now and assume a 5% yearly return.
Left alone, the $5,000 grows to about $8,235. That leaves $41,765 to cover with deposits.
Saving $268.96 a month for 120 months closes the gap. You put in $37,275 in total, and returns add the rest.
At a 0% return you'd need $375.00 a month instead.
Common questions
What return should I use?
There isn't a right number, because nobody knows future returns. A savings account or CD pays a stated rate, so use that. For investments, run the calculator at a low and a high rate and plan around the lower one. Using 0% shows the most you'd need to save.
Does this include taxes or fees?
No. Fees and taxes on earnings lower your real return. If an account charges fees, subtract them from the return you enter. For example, use 4.5% instead of 5% for a fund with a 0.5% yearly fee.
What if I already have enough?
If your current savings will grow past the goal at your return rate, the calculator shows $0 a month and how much you'd have.
Should I save in a 529 plan?
A 529 plan is a common choice because earnings aren't taxed federally when used for qualified education costs. Read the IRS 529 plan Q&A and your state plan's rules before you decide. The 529 plan calculator shows how contributions could grow.
Is it better to save or to apply for scholarships?
Do both. Savings cover the part you know you'll owe. Scholarships lower the amount you need in the first place, and you can start applying in high school.