College can be a scary topic for many parents. It can be hard to know where to start. Try using this American Funds College Cost Calculator to find an estimate of how much a specific college might cost in the future and how much you would need to save per month to help your child get there.
1. Enter your child or future student's information. This includes their name, age and when you think they will attend college. If you don't have any kids but are planning for the future, enter an age of 0 and pick an age of starting college that reflects how far out you think dropping your kid off at the dorm will be (for example, if you think you'll have kids in two years select 20 as the age of attending college). You can add additional children by selecting "Add a Student" at the bottom right side of the page.
2. "Select a Specific College" under the category "College Costs." Not sure yet where your kid will end up? No problem. Either keep the default of the current national average, or just take a guess. I recommend looking up a few different options - one in-state public school, one out-of-state public school, and one private school so you can get a general sense of the potential difference.
3. Select an inflation rate. The current average is 6% increase a year. If you think that will go up or down you can change the number to reflect your best guess. Remember, we have no way of knowing what college costs will do in the future, so the best we can do is make an educated guess.
4. Select the percent of costs you would like to try to pay. Do you want to fund all of the college costs? Great, leave it at 100%. Think mom and dad paying for half of college seems more reasonable? Change this number to 50%.
5. Fill out the information under "Savings Plan." Do you already have an account started? Perfect, enter the amount in the fund. Already making monthly contributions or have a number in mind of what you'd like to contribute? Enter that in the "ongoing contribution" category. Have no idea? Leave it blank, and the calculator will give you some numbers to consider.
6. Click "View Detailed Results."
7. See how we're doing. Compare the "Cost you plan to fund" with "Your Projected Savings" to see how your actions are aligning with your goals. Not quite where you need to be? Read the "Savings Deficit" column to see how much you would need to increase your monthly contribution to reach your goals.
8. Reassess your goals. Do you want to pay for all your kid's college, but the monthly amount to make that happen looks unrealistic? Reassess your goals. Would half of college costs be more reasonable? Click "Edit Inputs" at the top to see how those numbers come out.
9. Talk to your student and set clear expectations. Don't wait until their senior year to tell your son or daughter how much you can afford to contribute to their education. Set the expectations for what you can afford to pay early so your child can take them into account when considering his or her options.