August 5th, 2026
By the time a baby born in 2026 leaves for college, four years at a public university will run around $276,000. That's using in-state tuition, room and board, and a 4% inflation assumption. Most parents of young kids never run that number. They throw a couple hundred bucks a month into a 529, hope it covers the bill (and find out years later it didn't). At that point, they’re left with either paying the bill out of pocket or their child has to take out student loans. Here's how I'd approach college funding for a young child in 2026 so that number isn't a surprise.
1. Pick a school and research tuition
The difference between in-state and out-of-state tuition could be in the realm of half a million dollars by the time your child goes to college, so picking a school for planning purposes is very important. That said, it’s very hard to predict where your child will end up going to school, or if they will even go at all, making it difficult to plan for. That’s why I like to use the in-state tuition of the biggest public school in my client’s state. For example, if you live in Texas, I’d select the University of Texas at Austin as the tuition for the plan. Also, always include room and board unless you know for sure your child will live at home.
Here’s a good resource to estimate the cost of colleges across the U.S.
2. Project costs into the future
College tuition inflation ran at around 4.8% from 2000-2023, compared to 2.5% for the CPI-U. This is why we need to account for the fact that when your child goes to college, it will cost more than it does today. Now, this tuition inflation has slowed down quite a bit since 2020, so it’s not fair to assume that it will keep growing at 4.8%. Personally, I use 4%, as I’d rather overestimate inflation to minimize surprises.
I recently ran a college projection for a client who had their first daughter earlier this year. They live in Texas, so we used the University of Texas at Austin as their college, which has an all-in cost of around $32,000 per year (including room and board). Using a 4% inflation rate, that $32,000 will turn into $65,000 by the time their daughter is a freshman. But the math doesn’t stop there because tuition will continue to increase while she’s in college. It will increase to $67,600 in her sophomore year, $70,304 in her junior year, and $73,116 in her senior year, for a grand total of $276,020. Their faces dropped when I showed them that number, but thankfully, they’re starting early!
Should I include grad school in my college funding projection?
I also get that question a lot from clients. I don’t typically include grad school in my college funding projections for two main reasons:
- It’s hard enough to predict whether your child will get an undergraduate degree, let alone going to grad school. Locking up dollars in a 529 for something this uncertain could end up costing you down the road.
- They can take out student loans.
If you really feel inclined to pay for grad school as well as undergrad, you can pay for it out of your cash flow or other investments.
3. Establish your savings goals
There are many ways to save for college education. You are probably familiar with 529 plans, which are dedicated college savings accounts. The benefit of investing in these accounts is that the earnings that your investments generate are tax-free if you use the money for qualified education expenses. The issue with 529 plans is that if the money is not used for college, any withdrawal is assessed a 10% penalty and taxes on the earnings portion.
For example, if you have accumulated $100,000 in a 529 account, $40,000 of which is growth from your investment, any withdrawals would be assessed a 10% penalty on the earnings portion. Therefore, liquidating this account would result in a $4,000 penalty (10% of $40,000) plus income taxes.
For that reason, I like to take a blended approach to college savings. I recommend saving 70% of your college savings goal in a 529 and the remaining 30% in a brokerage account in the name of the parents. Brokerage accounts don’t have any tax advantages, but they also don’t have any restrictions, so you are free to use that money for any purpose. Going back to my client’s example above, if the total funding goal is roughly $276,000, around $193,000 should come from the 529 account and $83,000 from the brokerage account.
To determine how much money you need to save each year to reach that goal, simply use a time-value-of-money calculator.
4. Open your 529 account
States are responsible for establishing and maintaining 529 plans. That said, you are free to open an account with any state, not just your home state. There are three things to keep in mind when shopping for a 529 platform:
- State tax benefits: Over 30 states offer tax benefits for residents who take advantage of their 529 platform, so make sure you are familiar with your own state rules.
- Internal investment fees: Each investment option on a 529 platform has internal fees. Over years of compounding, even a 50 basis point difference between two investments can mean thousands of dollars lost to fees.
- Investment options: If you like to build your own portfolios, you will want to make sure the platform has sufficient options for your needs.
For the brokerage account, you can open it at any of the major financial institutions.
5. Pick your investments
The tricky part of investing for college is that the runway is much shorter than for retirement. You can be more aggressive when your child is very young, but you need to reduce the risk in your portfolio as they get closer to entering college. You don’t want your account to drop by half just before you need to make your first tuition payment because the stock market crashed. This means you need to be smart about how you invest the funds in your account.
Thankfully, most 529 platforms allow you to pick from a list of enrollment-date portfolios. The portfolio starts off more aggressive when your child is young, and gradually becomes more conservative and less risky as they approach college. This minimizes the risk that your account loses half of its value right before you need it. The issue is most enrollment-date portfolios get too conservative too quickly, which could mean missing out on several good years of compound growth. For that reason, make sure you review the underlying portfolio of each enrollment-date fund before selecting one.
Bottom line
Almost every parent defaults to a 529 account for college, but in my experience, it is rarely the complete answer. Mixing in other savings vehicles protects you from tax penalties if your child decides to skip college. It also allows us to build an investment track that dials back risk as high school wraps up, keeping a sudden market drop from wiping out your balance right before the first tuition bill arrives. The parents who feel truly calm about college aren't holding the largest accounts; they are the ones who ran the real numbers while their kid was still in a crib.
Ready to make a plan?
If you'd rather not build this alone, schedule a free intro call to see how we can help you get to your number.
Schedule your free introductory call
Learn more about our services & pricing
About SharpEdge Financial
SharpEdge Financial is a fee-only financial planning firm serving Millennial and Gen Z attorneys. Whether you’re just starting out in Big Law or approaching a career transition, we’re here to guide you through the complex decisions that come with high-income professional life.
Frequently Asked Questions
Plan for around $276,000 for four years at an in-state public university. That figure uses today’s tuition plus room and board (about $32,000 a year at a school like UT Austin) grown forward at 4% annual inflation. It’s an estimate, not a guarantee, but I’d rather plan around a number that’s a little high than get surprised.
You can still get the money out, but any withdrawal not used for qualified education expenses gets hit with a 10% penalty on the earnings portion, plus income tax on those earnings. So if you had $40,000 of growth in the account, that’s a $4,000 penalty on top of the tax. This is the main reason I don’t fund 100% of the goal inside a 529.
I use both, roughly 70% in a 529 and 30% in a taxable brokerage account in the parents’ name. The 529 gives you tax-free growth for education, and the brokerage account gives you flexibility with no penalty if your child skips college. The blend means you capture the tax break without trapping money you might not spend on tuition.
Yes. States run the plans, but you’re free to open one in any state, not just where you live. Before you pick, compare the state tax benefit (over 30 states offer one to residents), the internal investment fees, and the range of investment options. A small fee difference compounds into real money over 18 years.
I use 4%. Historically, college tuition inflation ran near 4.8% from 2000 to 2023 [source] versus about 2.5% for general CPI-U, but it’s cooled since 2020, so assuming 4.8% forever feels too aggressive. I land on 4% because I’d rather overestimate and be pleasantly surprised than plan short.
SharpEdge Financial LLC is a registered investment adviser registered with the State of Texas. Registration does not imply a certain level of skill or training. The views and opinions expressed are as of the date of publication and are subject to change. The content of this publication is for informational or educational purposes only. This content is not intended as individualized investment advice, or as tax, accounting, or legal advice. Although we gather information from sources that we deem to be reliable, we cannot guarantee the accuracy, timeliness, or completeness of any information prepared by any unaffiliated third-party. When specific investments or types of investments are mentioned, such mention is not intended to be a recommendation or endorsement to buy or sell the specific investment. The author of this publication may hold positions in investments or types of investments mentioned. This information should not be relied upon as the sole factor in an investment-making decision. Readers are encouraged to consult with professional financial, accounting, tax, or legal advisers to address their specific needs and circumstances.