Comments on: What Do You Need to Save For Your Child’s College Education?

By: PiFreak

PiFreak — Wed, 03 Sep 2008 00:34:33 +0000

I’m pretty sure my parents will contribute some, but at a modest 50k a year income, my school of my dreams (Caltech) would pay my tuition. I plan on at least a few smaller scholarships to help pay textbooks, and I have a savings account that’s now over 2k. For a 17 year old girl, my yearly clothes budget (including shoes and prom dresses) is under $100. Last year I spent $78 on clothing, and about $20 went to two amazing t-shirts from caltech that are incredibly nerdy, and another $25 went to prom, so my basic clothing needs are very tiny. A new pair of shoes, shorts, and a couple of shirts. Everything else, I either don’t buy, or my parents will buy it for me if it’s necessary, or get it for my christmas or birthday present if it’s still a want at that point. (My birthday present this year was a $17 Taylor Swift CD, and 3 days later, I saw her in concert[free tickets] and got it autographed) So all in all, we have a lot of savings, and we haven’t necessarilly earmarked it for college, but that’s where my money will go.

By: almost there

almost there — Mon, 01 Sep 2008 00:19:13 +0000

I work at a university and am greatful for the job as a staff member but have come to realize that the education system is just another business trying to sell a product in exchange for your money. My wife and I earn too much to qualify for financial aid for our son. He had a 2.97GPA on graduation from HS so all scholarships are out. (but he did get 17 sem. hours applied from the IB program in HS)I disagree that the earnings AND SAVINGS of parents are considered when applying for financial aid. The student’s income/wealth should be the only factor. But all is fine. I pay the bills as they come in (no college fund) and my son lives at home. He works 40 hrs a week and plans to graduate in 4 years with a double major. One mentioned the military as a source of college. I am suprised that more didn’t. Join the Navy though, with the army the G. I. Bill may cost you an arm and a leg.

By: Megan

Megan — Sat, 30 Aug 2008 19:36:06 +0000

I agree with starrycynthia. I understand that this post was specifically about saving for college, but I think that every discussion about saving for college should start by mentioning that college savings are a want, not a need, and that we should only consider saving for a child’s education after we have ensured that we have a positive budget (spending less than we earn), that we are responsibly paying down current debt, and that we are saving a sufficient amount for retirement. After that is all taken care of, save as much for college as you can/care to. I just don’t think that many children would choose to have college paid for if the price is assuming all financial responsibility for their parents’ old age.

By: starrycynthia

starrycynthia — Sat, 30 Aug 2008 18:52:01 +0000

I believe in maximally preparing for one’s own retirement years before saving for children’s college. If you can do both — fine, IMO, but if you can’t, retirement is what to save for first, no matter how young you are.

My 2 cents’ worth.

By: Michelle

Michelle — Fri, 29 Aug 2008 22:39:17 +0000

Whether or not the parents should pay for school is totally dependent on the child. Some children will work hard in school no matter what and others will slack off no matter what. My parents paid for my entire schooling, room and board, everything for four years. I still worked a part-time job because I wanted my own spending money and savings and had 2 internships as well during my years in school. I graduated summa cum laude and with no debt at all. They plan on paying part of my graduate school expenses as well. My brother was offered the same deal and flunked out his first year and joined the airforce. I will of course save enough money to pay for my kids college but only give it to them if I feel they deserve it and will work hard for it. I dont care for laziness but I will reward hard work.

By: Lauren

Lauren — Fri, 29 Aug 2008 21:15:24 +0000

oops! I meant “literally.” That’s really embarassing for someone with an English major. :op

By: Lauren

Lauren — Fri, 29 Aug 2008 21:13:02 +0000

There are other options to help with paying for school.

There are litterally thousands of private scholarships, grants, and fellowships available to students every year. If someone has good grades and is willing to seek out these opportunities, you can get alot of assistance, such as money you don’t have to pay back (like the loans the government will try to give you) and potentially, with the fellowships, a job straight out of school.

By: Diane

Diane — Fri, 29 Aug 2008 21:01:26 +0000

We told both of our kids that they needed to contribute $5000/year while they lived away from home at state colleges. This money could come from jobs, scholarhips or loans. Both played college sports, (one with a $2000/yr scholarship, one with no scholarship), but both managed to work when they could and come up with the money. Each ended up with only about $2000 in loans. We kept all the money in one account that I controlled and I transferred their monthly expense money to their own checking accounts. Both have degrees, jobs and are totally on their own. Since we had 2 years with both in college, this plan made the expenses manageable for us.

By: castocreations

castocreations — Fri, 29 Aug 2008 20:16:57 +0000

I have no intention of saving money to pay for my (future) children’s education. My mother did not support my college bills (other than the occasional check for $100 every once in awhile … it helped cover a book or two) and I worked full time from senior year on. Not a minimum wage job but a ‘good’ job that led to relevant work experience that led me to the company I work for today. Without the work experience my degree would mean very little and I’d probably be working now for a fast food restaurant.

Work experience and paying your own way builds a lot more character (IMHO) than having your way paid for you either by state or parent. I got two small scholarships and two small loans (one of which I just paid off!).

My brother on the other hand was solely dependent on my mother – she cosigned loans and sent him money. He still has not graduated (8 years later). He is in extreme debt and my mom is liable for all of it. It’s sad and a pathetic situation.

Besides all that – how do I know my kids will even want to go to college? Not everyone needs to you know. What if they want to join the military? Or become a plumber? :)

By: Misty

Misty — Fri, 29 Aug 2008 17:56:42 +0000

I am surprised to see how biased some of these posts are. When I attended college, my parents paid for all of my schooling (including room and board). They paid for this because they bought land when I was young in a developing neighborhood to build a house on, but later decided to stay in the same house and break the land into smaller parcels and sell it. It more than doubled in value and they used the money for college.
I did not get any spending money, as a result, I had a job within my first semester. I took my schooling seriously and graduated in 3.5 years. My parents told me how much they were paying and I was grateful that they made my education a priority and that I didn’t have to work full time like one of my other friends. Also, because of their income, I qualified for little financial aid.
My husband, on the other hand, had his first year of college paid for. He partied too much and flunked out. Later, he went to school, worked and paid for it himself and made a 4.0. Then he transferred schools, signed into the military officer program and graduated a few years later. We are still paying back the loans from his schooling (officers do not receive free schooling like enlisted).
Now, we are debating on saving for our infant son. I believe that if we preach that education is important to him, but don’t make it a saving priority, we are not backing up our words with our actions.
Thanks for the idea on saving a percentage, this may be a good solution.

By: Bill

Bill — Fri, 29 Aug 2008 17:23:11 +0000

You can transfer a 529 to close relatives including the beneficiary children. I know ESA’s have to be used or liquidated by a certian age, 27 I think. I don’t know if 529 have to be used by a certan age. If you could roll over unused amounts to the next generation could become a nice little family tradition.

Oh, if they choose not to go or quit. I’m paying the tax and 10% penalty and going on a very nice cruise!

By: getagrip

getagrip — Fri, 29 Aug 2008 17:19:59 +0000

@ Heather The 529 account is typically a trust held by the parent with a named beneficiary, usually their child. As the trust “manager” (I can’t recall the proper term at the moment) for my kid’s accounts I can change the beneficiary at any time to anyone with a family relationship to me. Unlike Uniform Gift to Minor accounts, the beneficiary has no control over the fund even as adults, so I’m under no requirement to give them the money. So if one child doesn’t use it or doesn’t need all of it or just really pisses me off I can change the beneficiary to another child of mine or any relation, be they cousins, parents siblings, in-laws, etc. As long as the money goes to an accredited institution and pays for educational expenses, it’s all fair game.

As a last recourse, I can pull the money out and pay taxes and penalties on it.

By: Kevin

Kevin — Fri, 29 Aug 2008 17:07:22 +0000

Heather – if one child doesn’t use the money you can change the beneficiary (to another child is the most likely one) but I have heard you could actually change it to yourself or spouse if you wanted to go back to school. Otherwise, just pull the money out and pay the 10% on the earnings.

By: Laura

Laura — Fri, 29 Aug 2008 16:16:23 +0000

Hmmm. The multi-pronged approach is best. Save, save, save. Drive the beater car. Apply for those scholarships. Encourage your kids to get involved in the community. Our son’s college surprised us by giving him a scolarship based on his community involvement. It was enough to make the balance of the costs do-able without applying for loans.

By: Frugal Vet Tech

Frugal Vet Tech — Fri, 29 Aug 2008 16:12:02 +0000

My husband and I both came out of school with a decent amount of student loan debt between the two of us. I’m back in school and when I’m done, I’m thinking we’ll have roughly around $50k in student loan debt (yikes!). Before I went to school (and thus, had less debt), our student loan payments were less than $200/month combined. Those payments are just not a big burden. No, we don’t like having debt, but having that debt and those monthly payments isn’t keeping us from doing things we want to. What keeps us from doing things like buying a house is the credit card debt. Once we get rid of that, things will be much easier.

So while it certainly would have been nice to come out school without student loan debt, the monthly payments are not a big deal (and we both attended a private college). Yes, we’re both working now, but we are not in high-paying jobs and pulling in $100k a year.

When we have children, we’ll most likely help them out with college if we can afford to and if they’re working hard at school and making ends meet, but we’re not going to be working extra jobs and shorting our retirement savings (or monthly bills, etc.) to pay for their college. And if they’re not interested in getting good grades so they can get scholarships or in working and contributing, we sure won’t be paying for their college.

By: Savings Toolbox

Savings Toolbox — Fri, 29 Aug 2008 15:20:17 +0000

The last point you made in the post probably should be moved up to the top stop – saving money for college educations should be started as soon as possible. Regardless of how much you can put away when your children are young, start saving early, leave it alone, and let it build up over the years. Hopefully, as time goes on, you can add a little more to your deposits each time. Education cost sure aren’t going done any time soon. Teach your kids the value of money and the importance of saving as young as they can understand the concepts.

Informative post!

By: Xenko

Xenko — Fri, 29 Aug 2008 14:47:35 +0000

Another advantage of starting a plan like this is that is gets cheaper with time. Assuming 3% inflation per year, the real value of your contributions decrease with time, making it easier to save the money in the future. Assuming a 3% yearly inflation:
Year 1: $238
Year 2: $231.07
Year 5: $211.45
Year 10: $182.41
Year 18: $143.99

The other advantage is that if your rate of return doesn’t quite match your assumptions, you can always increase your contributions by the annual inflation rate and you shouldn’t really notice any change.

By: Sandee

Sandee — Fri, 29 Aug 2008 14:29:25 +0000

This topic is fresh in my mind since I just had one son graduate and I have another still in college. College is expensive. Financial aid is a nightmare. Finishing a degree in 4 years is very difficult. Many degrees actually are designed to take longer that 4 years. My son had to pay tuition while he was doing his internship. He wasn’t on campus, they didn’t even help him find the internship and he still had to pay.

My DH and I are lucky that we could help pay most of the education expenses for our boys. We feel that education is the best gift you can give your children. Our college graduate has only about $17K in student loans and our youngest will have even less since he is attending a community college. Good luck young parents.

By: Heather

Heather — Fri, 29 Aug 2008 14:22:02 +0000

if your child does not use the 529 money, what happens to it?

By: Kristen a.k.a. The Frugal Girl

Kristen a.k.a. The Frugal Girl — Fri, 29 Aug 2008 14:16:33 +0000

I don’t know…my husband and I don’t have a lot of money to save, and so right now, we’re opting for retirement savings over college savings. There are loans and financial aid for college, but there’s no such thing for retirement!

We’ll do what we can to save for them and help them, but with four kids, the likelihood of us saving up enough money to pay for four years of college for each of them is virtually nil. Maybe they’ll have to go to a community college for a while or maybe they’ll have to go to an in-state university and live at home, or maybe they’ll have to take some semesters off and work. I don’t think any of those options are the end of the world, though.