Saving for their child’s college education is one of their biggest stresses for parents across the US. What makes it even more challenging is the fact that they cannot figure how much they actually need to save. A recent poll indicated that up to 50% of parents admitted that they need some kind of education with regards to how much they should be saving for their children’s future education. If you are one of them, using the “2k rule” may help.
What Is The 2K Rule?
The 2k rule is a ‘Rule of Thumb’ designed by Fidelity to help parents estimate how much they should be setting aside for their kid’s college education. According to this plan, the goal is to provide up to 50% of the cost of public college from the parents’ savings.
The rule is quite simple—start by multiplying your child’s age by $2,000.
Suppose your child is 10 years old, your calculations would be:
$2,000 x 10 years = $20,000
This is the amount that you should have set aside for your child already as savings towards college. This, however, is a broad generalization and is not correct for everyone.
As with every other savings plan, it is best to get started early to gain maximum benefits. More than anything else, this is a great reminder of how much college can cost and helps you be better prepared to cover at least some of the expenses.
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