Your Kids' College Tuition Could Be $130,000 Per Year with child and orange background

Your Kids’ College Tuition Could Be $130,000 Per Year. Here’s How To Save Up For It (And Then Some)

Kids are expensive. During the highs of pregnancy and the preparing-for-your-perfect-angel phase, it’s easy to spend countless dollars on every little thing, from fancy bouncers and baby-sized bow ties to IQ-enhancing crib mobiles and pee pee teepees. Yes, it’s a real thing.

As soon as you get everything set up, the baby comes, and you realize you bought all the wrong things. Forget Amazon and comparison shopping at three different baby stores, you need the things NOW, so you run to the store in between feedings.

Of course, these early expenses don’t hold a candle to the growing expenses we face as kids grow. One family vacation to Disneyworld, coming right up! Price tag – higher than three years worth of diapers. And not to mention the preschool tuitions, easily rivaling the mountain of college tuition down the road.

Sure, you’re thinking, my kids will be really smart or really sporty, so they’ll be sure to have their pick of colleges, complete with full rides. If you’re in this camp, you clearly haven’t had your baby yet. Just kidding. I’m sure your child is perfect.

Or, maybe, you’re like me and thinking, gee, I’m not sure where my kids will go to college, or even if college will be the right move for them, but I want to be ready just in case, as I don’t want to saddle them with an insurmountable sea of student debt when they’re just starting out their lives as young professionals.

In 18 years, the average tuition at a private 4-year college is estimated to be around $130,000 per year. That’s over half a million dollars in tuition over four years, and that’s just for one child!

So how do we get there? No no, you can’t return your baby. Those things are nonrefundable.

It’s doable, I promise. Let’s take a look at four potential paths.

But before we do, just a quick disclaimer. These examples are highly simplified and based on estimates and historical performance. They are not guaranteed and should not be used as a financial plan. “Duh” disclaimer over. On to the good stuff!

Path 1: Save like crazy

Let’s say that you’re a good saver. When your kids are young, you manage to save $500 per month starting from birth. That comes out to $108,000 over 18 years. Add in the interest you would accrue during that time, and you’re at around $140,000. Not bad, you’ve saved enough to pay for one of four years. If you could save 4x that amount, or $2000 per child per month for 18 years, you might make it.

I don’t know about you, but I don’t have $4000 that I can put in savings per month for my two kids. Especially not after the babysitting costs, allowances, eventual sports and art and music classes, and those cars I know I’ll end up having to chip in on. Sigh.

Path 1 Grand Total


Path 2: Invest in the stock market

I predict that in 18 years, the stock market will 10x itself, and we’ll all be gazillionaires. Trust me, I really would do that for you if I could. It might throw off the world economy, but I can guarantee you’d have enough for $130,000 per year in tuition.

Unfortunately, as we all know, the stock market is unpredictable. Still, there are plenty of people who have made fortunes in the stock market, so perhaps our college tuition could come from there.

Let’s take historical performance, with an average annual return of about 8%. Let’s say you invest that same $500 per month, compounding annually. Over 18 years, you would have around $225,000. Hey, we can almost pay for two years of college tuition now.

Path 2 Grand Total


Path 3: Invest in real estate

Everyone knows that real estate tends to appreciate over time. That house across the street that was listed for $400,000 last year? It might now be worth $430,000.

Sure, a $30,000 return on $400,000 might not sound like much, but let’s look at the anatomy of this theoretical investment. The owner probably put $100,000 down (25%), which means that $30,000 increase in value is actually a 30% return on investment, and in just one year. And this doesn’t account for the monthly cashflow returns from renting out the house.

Okay, I know what you’re thinking, where am I going to find $100,000 to put down on a house, right? Let’s take a step back for a second. Assuming we’re starting in the same place as in the previous examples, let’s start out by saving $500 per month. In 5 years, you’ll have saved $30,000.

Now, instead of keeping that $30,000 in cash in your savings account, let’s say you use it to buy a $120,000 rental house. Your monthly mortgage would be about $500, and you could probably rent the home out for around $1000, netting you $500 per month.

Combine that with your original $500 per month savings, which you’re still doing, and now you’re able to save closer to $1000 per month.

Now, let’s look into the future. Roughly twelve years after buying the house, your little one will not be so little anymore, and they might start applying for colleges. At this time, based on appreciation rates at the national average of around 5% per year, your little rental house would now be worth around $215,000, with about $150,000 of equity that you can pull out. Not to mention, you’ll have received about $75,000 in net monthly cashflow from your tenants during these twelve years.

Combining that with the savings you were still accruing in cash, your total would be about $300,000. Much closer, but still not fully there.

Path 3 Grand Total


Path 4: Do it all, and more! The hybrid approach

I’m assuming you saw this coming. As you can see, each of these paths has its merits, and when you combine them all, you really start to see the power.

Ready to put it all together? Let’s do it.

Let’s start, as we previously did, with $500 per month, invested in the stock market. In 5 years, you’ll have about $35,000. You use $30,000 to buy a $120,000 rental house.

Three years after that, when your child is in second grade, your equity in the rental home has grown to $50,000. You refinance and take out that amount, to invest passively in an apartment building.

Over the next 5 years, as your first child becomes a teenager, that $50,000 passive investment in the apartment building pays you $4000 per year. When it’s sold in year 5, you get your original $50,000 back, plus $30,000 in profit. Altogether, your annual returns were 20% over 5 years. Definitely better than the 8% from the stock market, and much less hands-on work than your rental house. Just sayin’.

Meanwhile, you’ve saved up enough to buy another $120,000 rental house, so you do that too.

With 5 years left before your child goes to college, you take the now-$100,000 you have from that apartment building and invest it in another syndication. In 5 years, that grows to $200,000.

Ready for the grand total?

Stocks ($500/month, with two $30,000 withdrawals)


Rental house 1 (equity plus cashflow over 13 years, minus $50,000 cash-out refinance)


Rental house 2 (equity plus cashflow over 8 years)


Passive Apartment Investments (original capital, plus profits, over 10 years)


Grand Total


Fair warning, the graph above is very approximate. Its goal is mainly to show you the overall trend and the different investment events, not to show specific amounts.

In any case, we made it! And with $160,000 to spare. Time for that first class vacation you’re going to need after all those college applications.

But wait a second, you say. What about my other kids? Ah, right. Can’t forget about them.

Well, keep in mind in that year 1 of college, you will only pay $130,000 in tuition, so you still have $550,000 at your disposal that you can invest…in stocks, in another few rental houses, in real estate syndications, you choose.

Keep in mind, also, that this model assumes that you’ve saved $500 per month for both children and doesn’t account for any amounts your children might earn themselves or scholarships.

So all in all, is it hard to save up that much money? Heck yes. But is it doable? Also yes. As you can see, the best approach is to diversify and to leverage different types of investments to reach different goals. This takes planning, research, and a bit of courage along the way, but the payoffs can be huge.

While this simplistic model certainly isn’t the only way to go about it, it provides a high level view of one way to get there. With any luck, colleges will all be free in 18 years, and we can take the hundreds of thousands of dollars we’ll all have accrued and have a massive 5-star luxury spa retreat. Yes, I like the sound of that much better.

Want to stay in the loop? Subscribe to the Goodegg Scramble Newsletter

You might also be interested in...

Scroll to Top
Black bullhorn in a white box
OPEN Investments – Grab Your Spot Now!

Check out our open investment opportunities in the hottest markets in the country. Grab your spot now before we fill up! Note: These are 506(C) offerings, open to accredited investors only.