Although we often have clients with college-bound children and help them plan for their college savings, we are still amazed ourselves at how much college costs. Everyone knows that college is getting more expensive every year. Nevertheless, many are surprised when they see the projected future costs.

State governments are in a money crunch and therefore are not contributing as much as they did in the past to the public colleges in their states. College costs have been increasing anywhere from 5% to 8% annually. It seems like every day you pick up the newspaper and see that a college is increasing its next year costs by eight or ten percent.

Saving early is the key. Our example that follows will illustrate this. The current cost for a freshman at Michigan State University currently is approximately $19,924 for tuition, room and board and books. The total cost for four years, starting eighteen years from now is estimated to be $247,784. This assumes a six percent annual increase in the costs going forward.

For a couple with a baby just born, who start saving this year and save the same amount monthly until the second semester of their child’s senior year at MSU, the required monthly savings would be $ 575, assuming a 5.19% average return in a moderate-age-based portfolio in a Vanguard 529 college savings plan. This rate of savings would provide for the payments to be made at the beginning of each semester for the four years.

If the couples’ child is currently five years old and they start saving now, they’ll have to save $651 a month. If the child is currently ten years old and they begin saving now, the savings amount jumps to $806 a month! Or, the parents of a newborn could invest a lump sum now of $89,278 and have enough for the four years’ expense.

If you have children or grandchildren and want to provide for their college education, hopefully you’ve already started saving for their college. Maybe you’ll be lucky and they’ll get an academic or sports scholarship. For those who aren’t so lucky, the key will be to start saving early or be prepared to sacrifice significantly, later. Whatever the case, it’s never too late to start saving. Whatever the amount, every little bit helps!