Here's how much you should contribute to your kid's 529 each month (2024)

When it comes to saving for your child's education, time (and compound interest) is your biggest ally. That's why the sooner you begin the better. Financial experts often recommend a 529 college savings plan as a good starting point.

A 529 is essentially a state-sponsored investment account dedicated to saving for higher education: You contribute money to the account consistently and over time your college funds increase. 529 earnings grow tax-free and withdrawals are also tax-free as long as they're used for qualified educational expenses — think tuition, housing and books. One of the best parts of a 529 plan is that your savings earn compound interest, which helps your money better withstand the pressures from inflation over time.

Opening a 529 is easy to do, but deciding just how much to put into the account is a whole other ballgame. Like many other facets of personal finance, the short answer is "it depends." To get more specific, CNBC Select turned to student aid expert Mark Kantrowitz for advice on how much you should be setting aside in that 529.

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How much you should save for college each month largely depends on two factors: the age of your child when you start saving and the type of school your child will likely attend.

For the purposes of this story, and for Kantrowitz's calculations that he provided us, we assume the parent starts saving at their child's birth through college enrollment. There are three different monthly contribution amounts, depending on if the child plans to attend in-state public college, out-of-state public college or private college (all four-year terms).

The monthly contribution amounts below represent how much to save each month to pay for one-third of future college costs. This is because Kantrowitz uses what's called the "one-third rule" when predicting how much parents need to set aside monthly. The rule follows the assumption that the average American family doesn't pay for college all in one lump sum and instead uses a three-pronged approach: 1) college savings (or past income) makes up one-third of future college costs; 2) current income and financial aid make up another third; 3) and the last third is made up of student loans (or future income).

Here are today's current monthly estimates, according to Kantrowitz:

• For in-state, four-year, public college: minimum $300 per month
• For out-of-state, four-year, public college: minimum $500 per month
• For private, non-profit, four-year college: minimum $650 per month

"The figures are designed to be somewhat stable, but changed recently," he adds.

How to check if you're on track

For parents who have some savings for college set aside for their kid but want to know whether or not they're on track, Kantrowitz tells us he has a calculation you can use for that, too.

Using your kid's current age in years, multiply that number by $3,000 if they plan on attending an in-state, four-year, public college; by $6,000 if they plan on attending an out-of-state, four-year, public college; and by $8,000 if they plan on attending a private, non-profit, four-year college. The number you arrive at is the minimum to be on track to save one-third of your child's future college costs. Using this method, as an example, if your kid is 13 years old and planning to attend an out-of-state, public university, you ideally should have $78,000 (13 years old x $6,000) saved up by then to be on track to cover one-third of their future four-year college cost.

When in doubt, you can try out online tools like this 529 college savings calculator that can help you figure out just how much to save for college in a 529 account.

When you're ready to start saving up for your child's college years, choose one of the top 529 college savings accounts. The good news is we did a little of the homework for you; some of our favorite options are below. (Seeour methodologyfor information on how we chose the best 529 plans.)

And there's more good news: Though 529s are state-sponsored accounts, you're not limited to your own state's plan. Some states do offer better incentivesfor their residents (likeIdahoandNew York) so first see what your resident state has in place.

A 529 college savings plan is a great financial tool to build a college fund. The monthly numbers included in this article are good benchmarks to strive for, but keep in mind that any amount of money you can set aside each month for your kid's higher education is better than nothing.

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To determine which 529 plans offer the best underlying investments, low fees and a variety of investment choices,CNBC Selectanalyzed dozens of offerings and narrowed it down to a list of finalists. We looked at plans with offerings from reputable companies and investment managers, plus a variety of options to help the investor meet their goals. We didn't evaluate 529 plans based on advantages (such as lower fees) for in-state residents or prepaid college plans.

We focused on the following features when comparing the best 529 plans:

• Management fees: The plans on our list offer some of the lowest management fees, important since these fees can affect your annual balance. Even a small fraction of a percent in fees can mean thousands of dollars in savings for the investor.
• Investment returns: Past results do not guarantee the future performance of any investment. However, seeing historical patterns of returns may indicate the plan manager is doing their job well. We looked at returns over a five-year time period.
• Fund expenses: Aside from management fees, we chose plans offering the lowest maintenance fees for their underlying funds. We looked at 529 plans offering more passive types of securities like index funds, with the expense ratio being a major deciding factor. These costs also affect the amount investors will be able to save.
• Investment options: Having more choices means that parents and guardians can decide how involved they want to be when selecting their portfolios. We looked at 529 plans offering more hands-off choices, such as age-based portfolios as well as individual funds.

Each state's 529 plan may have different minimum contribution amounts. Some may not have minimum contribution amounts but do for automatic contributions, such as payroll deductions. Each state also imposes its own cumulative contribution limit.