How Much Do You Really Need to Put in a 529 for College?

Summary

Ramsey Everyday Millionaires: “How Much Do You Really Need to Put in a 529 for College?”

Date: October 1, 2025
Hosts: Dave Ramsey, Ken Coleman
Guest: Gerard from Texas
Theme: Practical, realistic planning for college savings using 529 plans, future trends in higher education, and the true value of a college degree.

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Episode Overview

In this episode, Dave Ramsey and Ken Coleman tackle the practicalities and realities of college savings—specifically, how much families should be setting aside in 529 plans. Listener Gerard calls in seeking clarity after seeing alarmingly high savings suggestions from online calculators. The conversation then expands to include inflation trends in college costs, speculation on the future of higher education, and the importance of focusing on educational ROI over prestige. The hosts challenge outdated assumptions about both the need for a four-year degree and the impact of an elite alma mater.

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Key Discussion Points & Insights

1. How Much to Save in a 529?

• Gerard’s Situation: In Baby Step 2, nearly out of debt, planning for children aged 4 and 7’s college funds.

• Gerard was “confused” when the Dave Ramsey college calculator suggested “like 1100 bucks a month” ([00:46]), asking:

  "Is that normal to set that much aside in a 529?" — Gerard ([00:46])

• Dave’s Response:

  • The calculator number is not normal; $1,100/month is excessive for most families’ needs.

  • Recommended approach:

    "A couple grand a year is going to take you a long, long way towards doing this." — Dave Ramsey ([03:09])

  • Explanation: If you put ~$2,000/year per child (instead of per month), compounding and tax-free growth in the 529 could build into $100,000–$150,000 over time.

  • No taxes on growth:

    “If you put in $2,000 a year for 10 years, that’s $20,000 you put in. If there’s $120,000 in there, there’s $100,000 in growth. You got me? No taxes on that $100,000 is important because that’s a $20,000, $30,000 tax bill that you’re avoiding.” — Dave Ramsey ([02:41])

2. Realistic College Cost Projections

• Historically, tuition inflation has run 7–8%/year, higher than general inflation ([01:17]).
• Example: University of Texas in-state tuition is ~$14,000/year; four years is $56,000 now but could be much more in a decade.
• However, Dave and Ken both argue that runaway tuition increases are unlikely to persist ([04:35]):

  “I don’t think you’re going to see the exorbitant costs... I think we’ve kind of jumped the shark.” — Ken Coleman ([04:24])

3. The Future of Higher Education

• Decentralization & Alternatives:

  • Degrees in medicine/law will remain, but general four-year degree requirements may splinter, with more trade/program certifications ([03:26]).
  • AI and Private Sector Training:

    “I think people are going to come along, go wait a second, we can provide training for what corporate America really wants for a whole lot less money.” — Ken Coleman ([05:02])

  • Example: Google’s six-month career program ([05:18]).

• Student Loan Crisis Impact: Public backlash against college cost excess and demand for ROI ([04:35], [08:33]).

  “The student loan debacle has highlighted that some of the higher ed stuff is out of control. And so it’s not sustainable.” — Dave Ramsey ([04:35])

4. What Matters Most for Success

• Where You Go to School Doesn’t Matter:

  “The number of times that people become successful due to the particular school that they went to is precisely zero.” — Dave Ramsey ([07:21])

  • Data Point: “78% of Fortune 500 CEOs went to a state school!” ([07:50])
  • “They didn’t go to Wharton. They didn’t go to Princeton... Penn State, Michigan State, that’s where they went to school.” — Dave Ramsey ([07:51])
  • ROI example: It makes no sense to pay $250K for a master’s in social work to land a $38K/year job ([08:33]).

• Key Success Factor: Grit and self-development, not an elite diploma.

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Notable Quotes & Memorable Moments

• Dave Ramsey, on over-saving for college ([01:09]):

  “No, it’s not. I would not do that.”

• Dave, on the value of 529s ([02:41]):

  “No taxes on that $100,000 is important because that’s a $20,000, $30,000 tax bill that you’re avoiding…”

• Ken, on future of college ([05:02]):

  “You’re going to see private sector competition for traditional education... Google’s doing their own training program, six month program.”

• Dave, on educational elitism ([07:21]):

  “The number of times that people become successful due to the particular school that they went to is precisely zero.”

• Dave, on educational ROI ([08:33]):

  “I can’t spend $250,000 to become a social worker for the state of Tennessee with a master’s degree and make $38,000 a year. That’s dumb butt.”

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Timestamps for Important Segments

• 00:22 – Gerard introduces his college savings concern
• 01:09 – Dave refutes excessive 529 savings recommendation
• 02:41 – Tax-free growth of 529s explained
• 03:09 – “A couple grand a year” is enough
• 03:26–05:38 – Ken and Dave on the changing landscape of higher education
• 07:21–08:33 – The myth of prestigious institutions and real ROI analysis

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Tone & Language

The conversation is candid, no-nonsense, and peppered with the hosts’ signature blend of folksy wisdom and data-driven insights. The tone is encouraging but realistic—challenging listeners to be both sensible and skeptical when planning for college.

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Takeaways

• Don’t panic at high savings calculator numbers: Around $2,000/year per child is likely sufficient, thanks to compounding over time in a tax-free 529 plan.
• Expect big changes in higher education: Tuition inflation may slow or reverse; alternative paths (trades, certificates, private sector-led training) will likely proliferate.
• Focus on career ROI, not school prestige: Most top earners attended state schools, not Ivy Leagues.
• Be adaptable: Monitor trends, stay informed, and don’t fall for the “expensive college = success” myth.

This episode gives practical, actionable advice for families anxious about college costs—and strong reasons to question the conventional wisdom surrounding the value of a degree.

Transcript

[Ken]

This episode is brought to you by SmartVestor.

[Gerard]

Connect with an investing pro near you.

[Dave Ramsey]

At RamseySolutions.com SmartVestor all right, here we go with Gerard in Texas. Hey, Gerard, how are you?

[Gerard]

I'm better than I deserved, Dave. How are y'?

[Dave Ramsey]

All? The same, sir. How can we help?

[Gerard]

So my wife and I are on baby step two. We should be done with about 40,000 worth of debt by the end of the year, and we're going to be moving on to 4, 5, and 6. Already kind of have plans for retirement and early payoff of the house, but I'm confused a little bit on the college savings side of things.

[Dave Ramsey]

Cool. How old are your babies?

[Gerard]

Four and seven.

[Dave Ramsey]

Awesomeness. Okay. What are you confused about?

[Gerard]

So I looked at the Dave Ramsey calculator on how to save for college and what we would be putting aside just based on what we think living expenses are and tuition will be. That number seemed high, around like 1100 bucks a month or something like that. I didn't know if that was normal to set that much aside in a 529 or.

[Dave Ramsey]

No, it's not. I would not do that.

[Gerard]

Okay. Okay. What would y' all recommend as far as how to. How to tackle the tuition versus living costs?

[Dave Ramsey]

Yeah, I honestly, I need to go look at that calculator. It sounds like so tiny. Tuition has averaged 7 to 8% per year inflation rate for the last 40 years or so. And so it's, you know, Regular inflation is 2 to 4% average. I mean, one year. Biden, we had 9.7, but I mean, the normal inflation rate is 2 to 7 or 2 to 4. And then with this. So that's what it's going up. So you got a. You know, University of Texas is probably 14,000 right now in state tuition. And so if you wanted to say, okay, four years of that is 60,000 bucks, right?

[Gerard]

Correct.

[Dave Ramsey]

Okay. And then add 8% a year for a decade, and that's. That's where that's going to be your tuition cost. Right. And so that's what you would do. And then, yeah, we use a 529. Because if you put in, you know, a couple grand or something a year, not a month but a year, you're gonna have about 90 or 100. You probably have about 140,000 bucks in there, something like that, if you started with the babies. And so you'll have somewhere around 100, 150,000 in there. And a lot of that is growth. And if it's in a 529, in a mutual fund. Mutual fund in a 529, it's going to grow tax free for tuition. And so if you have $100,000 worth of growth, see, if you put it, okay, let's say you put in $2,000 a year for 10 years, that's 20,000 bucks you put in. If there's 120 in there, there's 100 in growth. You got me? No taxes on that. 100 is important because that's a $20,000 tax bill, $30,000 tax bill that you're avoiding by putting the mutual fund in a 529 for purposes of the kit.

[Gerard]

That makes sense.

[Dave Ramsey]

Yeah. So, yeah, I mean, a couple grand a year is going to take you a long, long way towards doing this. And the other thing that we would not have said 10 years ago that we will say today is I think higher education is going to look dramatically different 15 years from now, wouldn't you, Ken?

[Ken]

I've been pretty bold on that and I believe you're going to see a decentralization. You're going to see specialties like obviously medicine, law look very similar to how we see them today. But as far as the traditional four years and you got to take a bunch of undergrad stuff and you got the prerequisites before you get to the major, I think that's going to splinter. I think the onset of AI. I think that we are actually at a, I think a fever pitch on what the American people are willing to put up with. And I think when you see on.

[Dave Ramsey]

The rip off of meaning willing to.

[Ken]

Pay for it, give you real numbers. So you know where I'm coming from. Gerard Gallup came out with information this year. Year In a poll, 46% of American parents said they would prefer that their kids go into trades and not into college. Our good friend Mike Rowe, he's the, I call him the Oprah Winfrey of the trades. He's been banging this drum for a long time.

[Dave Ramsey]

You only like that as an insult.

[Ken]

But I do think Dave's right. I don't think you're going to see the exorbitant costs. I don't think now you got a plan for it, but I don't think you're going to see that. I think we've kind of jumped a shark.

[Dave Ramsey]

Well, the student change, student loan debacle has, has highlighted that some of the higher ed stuff is out of control. And so it's not sustainable. I do know that people are going to be more cognizant of what they pay and what they get for what they pay. That's right for sure. And so I think that's going to create a downward pressure on that inflation number that I gave you of 7 to 8%. So I don't think they're going to maintain that.

[Ken]

I think you're going to see. Dave, little quick prediction. I think I've been studying this. I think you're going to see private sector competition for traditional education. I think people are going to come along go wait a second, we can provide training for what corporate America really wants for a whole lot less money and make a ton of money doing it. And you're going to see these outsized tuitions go away because they can't compete with the private sector. Google's doing their own training program, six month program. I think we're going to see more and more big time companies are going to outsource their own education training to private education companies. Watch for that. I think that's going to happen.

[Dave Ramsey]

All of that to say that if you have put a couple grand a year for a four year old and a six year old, you're going to have 100,000 plus in there when you get there each and that's going to give you a real head start into whatever you want to do, whether it's a trade, a certification program or an actual four year degree. And which I'm not. We're not against four year degrees, we're just against getting a degree and for four years in left handed puppetry and from a school where you pay 150,000 bucks a year to go so they can brainwash your child into being a communist. And so that I'm against that. I think that's a problem. And so, and as a parent or a grandparent, I'm not writing that freaking check anymore and I'm not by myself. So that's what we're seeing. So I think you're doing your individual planning but you're doing it in the context of what is happening culturally right now on this subject. That's why we wanted to comment on it. So it's very good. And Ken, I think it's worth highlighting a couple things here while we're at it. You've been working with self improvement in the self improvement space and the new show Front Row Seat is helping people learn leadership skills and you know, highlighting stories of great men and great women and what they did to get there. And you know what we discover every time we do that? If you read biographies of great people who are successful in any function, whether business, ministry, sports, whatever, you find that they were the secret sauce, not where they went to school.

[Ken]

That's exactly right.

[Dave Ramsey]

And so the number of times that people become successful due to the particular school that they went to is precisely zero. And yet we go, well, if he went to Harvard, bullcrap. Nobody cares out here is the problem. It's all theory. There's no data to back it up. 78% of the Fortune 500 companies have a CEO that went to a state school. And 8 out of 10, shut up.

[Ken]

Had a 2.5.

[Dave Ramsey]

They didn't go to Wharton. They didn't go to Princeton. They didn't go to, you know, muckety muck school. They went to a state freaking school. Penn State, Michigan State. That's right. University of Tennessee. That's where they went to school. They didn't go to Vanderbilt. They didn't. The 78% of the CEOs of the Fortune 500 companies.

[Ken]

Not straight into data for you.

[Dave Ramsey]

Okay, so where you go to school doesn't matter. It's a big deal. It's right, because it costs out the butt to go to those places.

[Ken]

And we're beginning to see the American people. And this isn't just parents anymore. The young people are going. They're reading the stories. They're paying attention. They're older brothers and sisters. They're going. There's not a value exchange here.

[Dave Ramsey]

No. I can't spend $250,000 to become a social worker for the state of Tennessee with a master's degree and make $38,000 a year. That's dumb butt.

[Ken]

That's right. The ROI is not there anymore.

[Dave Ramsey]

Just doesn't work. So you guys got to think about stuff like that. And, Gerard, you're very wise to stay on top of the whole idea and be watching and monitoring all this as you go.