Blog
College costs have outpaced inflation for 40 straight years. A degree that cost $40,000 in 2000 now costs $110,000 (public) or $280,000 (private). The only way to keep up without taking on six figures of student loans is to start saving early and let compound interest do the heavy lifting.
The 529 plan is the most efficient vehicle: contributions grow tax-free if used for qualified education expenses, many states offer state income tax deductions, and there are no contribution limits that affect most families.
Assuming 6% average return and starting from $0 at birth, here is what monthly contributions grow to by age 18:
| Monthly contribution | Total contributed | Final value at 18 |
|---|---|---|
| $100 | $21,600 | $38,929 |
| $200 | $43,200 | $77,857 |
| $300 | $64,800 | $116,786 |
| $400 | $86,400 | $155,714 |
| $500 | $108,000 | $194,643 |
| $700 | $151,200 | $272,500 |
| $1,000 | $216,000 | $389,286 |
$300/month from birth grows to $116,786 by age 18 — enough to cover most public 4-year colleges in today's dollars. $700/month covers most private schools.
Calculate your specific college savings goal.
Open Compound Interest Calculator →If you wait until your child is 5 to start, you have only 13 years instead of 18. Same $300/month at 6% return:
| Start age | Years saving | Total contributed | Final value at 18 |
|---|---|---|---|
| Birth (0) | 18 | $64,800 | $116,786 |
| Age 3 | 15 | $54,000 | $87,256 |
| Age 5 | 13 | $46,800 | $70,238 |
| Age 8 | 10 | $36,000 | $48,995 |
| Age 10 | 8 | $28,800 | $36,914 |
| Age 13 | 5 | $18,000 | $20,872 |
Starting 5 years late cuts your final balance by $46,548 (about 40%). Starting 8 years late cuts it by $67,791 (about 58%). Compound interest punishes late starts harshly because you lose the most powerful years of growth at the beginning.
If you target "today's" college costs you will come up short. College tuition has historically inflated at 5-6% annually — faster than general inflation. Here is what today's $110,000 public college bill becomes in the future:
| Years from now (child age) | Cost at 5% inflation | Cost at 6% inflation |
|---|---|---|
| 0 (now) | $110,000 | $110,000 |
| 5 | $140,397 | $147,156 |
| 10 | $179,178 | $197,001 |
| 15 | $228,667 | $263,683 |
| 18 | $264,683 | $313,977 |
If you have a newborn today, you should target ~$265,000-$314,000 for a public 4-year, not $110,000. Adjust your monthly savings target accordingly.
| Years until college | Inflated public cost (5%) | Required monthly at 6% return |
|---|---|---|
| 18 | $264,683 | $680 |
| 15 | $228,667 | $793 |
| 12 | $197,556 | $972 |
| 10 | $179,178 | $1,093 |
| 8 | $162,508 | $1,287 |
| 5 | $140,397 | $2,012 |
The numbers are sobering. Saving $680/month from birth to fully cover a public college is realistic for upper-middle-income families. For most families, partial savings plus some financial aid plus part-time work plus some loans is the realistic mix.
| Account | Tax treatment | Pros | Cons |
|---|---|---|---|
| 529 Plan | Tax-free growth for qualified expenses | State tax deduction, high limits | 10% penalty + tax on non-qualified withdrawals |
| Roth IRA | Tax-free growth | Flexibility, doubles as retirement | Lower contribution limit, hurts financial aid less |
| UGMA/UTMA | Taxable to child | No restrictions on use | Counts heavily against financial aid, child controls at 18-21 |
| Brokerage account | Taxable to parent | Total flexibility | No tax advantages |
For most families, a 529 is the best choice because of the tax-free growth and state income tax deduction. The downside (penalties for non-college use) rarely matters because qualified expenses are broad: tuition, room and board, books, computers, and any accredited degree program.
529 plans allow "5-year averaging," letting you contribute up to 5 years of gift tax exclusion at once without triggering gift tax. In 2026, that means a single grandparent can contribute up to $95,000 ($19,000 × 5) in one shot per grandchild, or $190,000 per couple.
The compound interest on a one-time $95,000 contribution at age 0 (no further contributions, 6% return for 18 years): grows to $271,000 by age 18. That single contribution covers most of a public 4-year degree.
Use the compound interest calculator with:
Compare the result to inflated college cost projections. The gap is what financial aid, scholarships, work, and (ideally minimal) loans need to fill.
Project your child's college fund growth.
Open Compound Interest Calculator →