Dave Ramsey recommends saving as much as possible for college, ideally 100% of the cost if possible, to avoid taking on student loan debt.
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Saving for college can be a daunting task, and one may wonder how much they should save. Dave Ramsey’s advice is to save as much as possible, ideally 100% of the cost if feasible, in order to avoid taking on student loan debt.
Ramsey is a personal finance expert who has written several best-selling books and hosts a radio show. His approach to financial management is rooted in the principle of living within one’s means and avoiding debt.
According to the College Board, the average cost of tuition and fees for a public university in the 2020-2021 academic year was $10,560 for in-state students and $27,020 for out-of-state students. The average cost for private universities was $37,650. These costs do not include room and board, textbooks, and other expenses.
One way to financially prepare for college is to start early and contribute regularly to a 529 plan, which is a savings plan specifically designed for education expenses. The earnings from a 529 plan are tax-free if used for qualified education expenses, and some states offer tax deductions for contributions.
Another option is to apply for scholarships and grants, which do not need to be paid back. It is important to explore all available options and apply early, as many scholarships have early deadlines.
As Ramsey says, “You can’t go into debt for your kid’s college and come out ahead.”
Table: Average Annual College Tuition and Fees (2020-2021 academic year)
Public In-State University: $10,560
Public Out-of-State University: $27,020
Private University: $37,650
Response via video
Dave Ramsey advises a listener on the best option for college savings for their expected child, explaining that the ESA and 529 plans are currently the only available tax-free savings options for college. He suggests putting money into both plans for the first baby born in July and mentions a potential disruption in the education system that may render college costs irrelevant. However, he acknowledges that for now, tax-free options like ESA and 529 plans are still the best choice for college savings.
There are other opinions on the Internet
Ramsey states that parents should first fund their emergency fund, pay off all debt (excluding mortgage), and save 15% for retirement. Once these baby steps are complete, Ramsey says the next step is to save for college using either a 529 plan, a Coverdell Educational Savings Account, or through a trust.
Dave Ramsey’s Top 5 Ways To Save For College
- Save in an ESA or 529 Plan Ramsey’s favorite methods for saving money for college are Coverdell Education Savings Accounts (ESAs) and 529 plans, as they allow your funds to grow tax-free.
- Choose an Affordable College
The Best Way to Afford College: The Dave Ramsey Way
- Get out and stay out of debt Ramsey often advises people to cut up their credit cards and close their accounts for good. This mindset can also be applied toward student loans.
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What is a reasonable amount to save for college?
For example, you might plan to save enough for: Tuition only (about 50% of the total cost for public schools; 75% for private schools). Room and board, books, and fees (about 50% of the total cost for public schools; 25% for private schools). The first 2 years of college (50% of the total cost).
What does Dave Ramsey say about saving for kids college?
As an answer to this: "Don’t worry, this isn’t selfish—it’s smart!" Ramsey urges parents not to save for college until they have all of their debt paid off except for their mortgage loan, and until they have an emergency fund with enough in it to cover three to six months of living expenses.
How to save college fund Dave Ramsey?
The response is: Here’s what I recommend:
- Save $1,000 for your starter emergency fund.
- Pay off all debt (except the house) using the debt snowball.
- Save 3–6 months of expenses in a fully funded emergency fund.
How much does Dave Ramsey say to save?
The reply will be: The method recommends the following: Use 50% of the money you earn for necessary expenses, such as housing and transportation. Use 20% of your income for savings (including debt payoff). Use 30% of your income for anything you want.
How much should you save for college?
In reply to that: A: I don’t really have a rule, or percentage, for how much you should save toward a college fund. If you’re following the Baby Steps, I recommend getting 15% of your income going toward retirement before saving for college. After you have your retirement savings rolling, put what you can, based on your own unique situation, toward college funding.
How can Dave Ramsey help you in college?
Answer will be: Dave Ramsey also preaches to apply for as many scholarships as possible. The more you apply the more chances you can be offered grants and scholarships to help you in college. There are so many different types of scholarships for college students you can apply for. Such as essays, projects, art contests, and public speaking.
What are Dave Ramsey’s 7 baby steps?
In Dave Ramsey’s 7 baby steps, the first step is making an emergency fund of $1,000. For college students, this is vital to have because in college so many things can go wrong. Like your car breaking down, or maybe you broke your leg. By creating a saving fund on the side you are preparing yourself for financial stability.
Should you put your retirement savings into college funding?
Response to this: After you have your retirement savings rolling, put what you can, based on your own unique situation, toward college funding. If you have teenagers in the house, you need to get serious about college funding soon — like right now.
Is Dave Ramsey right about saving money for college?
Answer to this: Dave Ramsey is a big proponent of making smart financial decisions — which includes saving money. But, does he believe that parents should prioritize setting money aside in a college fund to help ensure their children can afford to earn a degree?
How much should you save for college?
A: I don’t really have a rule, or percentage, for how much you should save toward a college fund. If you’re following the Baby Steps, I recommend getting 15% of your income going toward retirement before saving for college. After you have your retirement savings rolling, put what you can, based on your own unique situation, toward college funding.
Should you start saving to help your kids cover a degree?
Response: After accomplishing these goals, only then does Ramsey think you should make a plan to start saving to help your kids cover the cost of earning a degree.
Should you put your retirement savings into college funding?
Answer: After you have your retirement savings rolling, put what you can, based on your own unique situation, toward college funding. If you have teenagers in the house, you need to get serious about college funding soon — like right now.