How Much Do You Need to Save, Invest for College?

— -- Q: Is it even possible for a typical family to save enough to send their children to college? If so, how much do they need to save and invest?

A: Given that kids will be competing for jobs with others around the world, the importance of higher education has never been greater.

With college costs skyrocketing, though, it's critical for parents to start thinking about how they're going to pay for higher education as soon as possible. Starting early will be the best way for parents of average or modest means to foot the college bill and prevent their kids from drowning in debt after getting their college degrees.

First, some staggering numbers to put all this into perspective. If you think you can wait and do nothing, and just pay for college out of your paycheck when the time comes, you might want to start asking for a raise now.

Today, the cost of a four-year degree as an in-state resident at a public university is $33,300, says Savingforcollege.com. In 18 years, that cost will soar to $95,000 based on 6% annual inflation.

To save for this investment with as little pain as possible, you're going to want to get started as soon as possible. For instance, let's say you start the moment your child is born, expecting for four-year enrollment in 18 years and a cost of $10,000 a year. You'll need to save $241 a month to have enough saved, assuming college costs rise by 6% a year and your investments return 7% a year.

However, if you wait just seven years to start saving, the plan gets much tougher, and you'll need to save $322 a month to make it, or 33% more. And if you wait until your child starts high school, as many parents do, you'll need to save $563 a month.

Again, all these numbers are based on the assumption you'll get a 7% annual average return. That's a relatively aggressive target, given that stocks typically return 10% a year on average and bonds do something closer to 2% a year on average. The later you start saving, keep in mind, too, that you'll need to dial back your risk as enrollment nears. That means you'll probably get closer to a 2% return than a 10% return the longer you wait.

Your best bet is setting up a 529 college savings account as soon as possible. You can sock away money and take the contributions and gains out, tax free, if you use the money for qualified college costs. It's about the closest thing you're going to get in the form of help in saving for this massive obligation. Most 529 plans have decent choices of low-cost mutual funds that spread your money in stocks and bonds.

If you have any questions about how much you need to save, Vanguard also provides a powerful tool to help you plan.

You can save for this goal. Just get started right now.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz