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As soon as you have kids, you start thinking about college. How much do you need to save for kids’ college funds now?

You want the best for your children. That means the future is on your mind, and something that will come up is college.

It’s important to get your kids’ college funds* set up as soon as possible. You don’t need to put a lot in at first, but you want to get them started. You also want to make sure that they’re in the best type of fund for your investment. You’ve got time for hits to the market, so opting for something like mutual funds could be more than worth the risk, especially for when the market is up.

That’s all great, but it doesn’t get you started on how much you need to save for your kids’ college funds. How much do you need to take out of your paycheck each month?

How much is college now?

Different colleges will have different amounts. If your kids are going to an Ivy League college, expect much higher tuition than a local community college. There is also the cost of living to consider. If your kid is staying in the local area, they can save money on rent by staying at home during that time.

You’re probably looking at $20k at least per year. That’s just a rough guide to get you started.

Don’t worry about saving everything. While you want your kids to be able to graduate debt free, that isn’t possible for everyone. There is no shame in kids taking student loans, but the fewer loans the better, right? This is why you save and look for scholarships—the aim is to reduce the fees and not necessarily wipe them all out if you can’t.

How much should you save for kids’ college funds?

So, let’s say your aim is to save the $20k per year. That’s $80k that you need for a four-year course. Let’s round it up to $100k just to be on the safe side for the cost of living and other needs.

Now you need to divide that by the time that you have left to save*. If your child is just born, you will be able to divide that by 18 years. Great, that’s $5,556 per year that you need to save. Divide that by the number of months in the year, you’ve got around $463 that you could do with saving.

That’s not going to be possible for everyone. Please don’t feel like you need to do that. This is based on if you put the money in a savings account with no interest. If you put the money in a mutual fund, there are excellent chances that you can save less and still reach $100k. I’m not even including anything that governments give toward college funds to help you toward that goal.

What’s your aim for your child’s future?

Assess what you want to achieve for your child when it comes to saving for the future. Do you really need to make sure they can go to college without any debt at all?

That’s not necessary. Again, loans are an option. They can also work, and remember you can help save for the subsequent years. Your main aim is going to be to have the tuition for the first year at first. Maybe you’ll want to make sure the first two years are covered.

You can half the amount that you aim to save*. This will half the amount that you need to save each month. It could be a little weight off your shoulders, and you give your children a good start in life. They don’t need to take out as much through loans, and they may end up with scholarships.

Just saving a little will help. It could even be saving enough for them to be able to rent somewhere close to their college, or it could be something to help make sure they eat and have the money to buy items they need at college. There are a lot of parents who can’t save anything at all, and that’s okay!

Whatever you do, make sure you treat each of your children fairly. Sure, one child may end up not wanting to go to college and you can roll the savings to the other one, but make sure you aim to save the same amount for all your children from the start.

MORE: How Township helps children learn about money

Do you need help setting up your RESPs for your children? Talk to me and let me see how I can help you!