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- The 529 college savings plan is one of the best ways to save for college. You can contribute money into an account, and it will grow tax-free, to someday pay for your child's education. But how much do you actually need to save, and how should you prioritize savings for your child's education against your other savings goals? Welcome to The College Investor. I'm Stefanie O'Connell from StefanieOConnell.com, here to share some answers. (ambient music) When it comes to saving for your kid's college, be sure to follow the order of operations. The key phrase is yes. Y is for you. You have to make sure your own financial house is in order, before you try to save for your kid's college. If you can't make rent or buy groceries, there are bigger issues to fix first. The you bucket also includes saving for your own retirement, and making sure you have an emergency fund. You can't get a loan for retirement, so make sure you save for yourself first. E is for education savings accounts. If you've saved for yourself, next you can save for your child in education savings accounts, like the 529 plan. S is for savings. After contributing some amount to the 529 plan or other education savings accounts, it's smart to save in a traditional savings account as well, in case there are other expenses you wanna help your child with, that don't qualify as educational expenses. Remember, as a parent, you don't need to pay for 100% of your child's schooling. It's their college, not yours. Plus, there are tons of ways for them to find help paying for school, from finding scholarships to getting student loans. According to the college board, the average cost of a public four year college in 2015 was $9,139 for in-state tuition. The average cost for a private college was $31,231. So, say you've decided to save for an in-state college that currently costs $9,500 per year, and you wanna pay 50% of the projected college costs. If you expect cost to continue to increase by 4% per year, and you expect to get a 6% per year return on the investments in your 529 plan, you should be saving about $96 per month for your child's college, or $1,151 per year. But if you're on the higher end and you wanna pay 100% of your child's education expenses at a four year private college, that means contributing closer to $630 per month. Check out the link in the description below to see the full breakdown of these numbers, how much you should be saving by age, and the total amount you should have saved for your child's college education by the time they reach their college years. I'm Stefanie O'Connell, and I'll catch you next time.