A different kind of college savings question

[MrsPete]

One of our goals is to help our children earn a debt-free college degree.  We set some guidelines about what we could/couldn't pay:  State school, 4 years, tuition and fees, dorm and meal plan.  Our idea:  We'd pay the basics, they'd be responsible for spending money, transportation costs, and extras.  We're financially able to do this, and the kids recognize it as the blessing it is.  Our first is in college and is working hard. 

Here's the question:  What do you do when the kid earns a scholarship that pays half the cost of the entire education?  Note that it is a scholarship that does tie her down a bit:  That is, she is required to work in a certain area for a few years after graduation. 

Obviously we were thrilled, celebrated with dinner out, still smiling -- and I'll tell you this:  Having someone else essentially say, "Your child is such a value to society that we are willing to pay a portion of her education" is worth just as much as the cash.  But I digress. 

We'd promised to pay $$$$, and now we only have to pay $$.  But it's because of her efforts that we're paying less, so we think it's fair that she benefit from this windfall too -- she earned it.  I have promised to pay for a summer school class, though originally we'd said we would pay only for the fall and spring semesters for 4 years.  (Oddly, this summer school is mandatory -- all nursing majors must take this class the summer before they launch into student nursing.)  And I've agreed to pay for her scrubs, which are sold only in the bookstore and are monogrammed with both the school logo and the student's name; they're far more expensive than is fair, but it's a requirement for student nursing, and it isn't going to change.  And we're going to buy her a used car for student nursing.  The upshot is that we're probably going to spend $$$ instead of $$$$.  We weren't originally going to do these things, but since she "earned" so much through the scholarship, we thought we should reward her efforts and achievements. 

Just wondering how other people would've handled this happy situation? 

[zhelud]

If what you are saying is that you have a pot of savings for your daughter that now won't be depleted as you thought it would be, why not just give her the remaining balance when she graduates? She could have moving expenses, need a security deposit for an apartment, etc. Or you could put it in an IRA for her. Or you could just keep it and tell her that if she wants to pursue a graduate degree, you will use it to help her.

[matchewed]

If the money you have saved for your child is in a 529 there isn't much you can do. If it is outside of that I'd recommend putting it in a Roth IRA for her if she earns income. Gives her a leg up, the contribution is untouchable without penalty for five years, and show the importance of saving.

[avonlea]

I don't know much about your daughter's field of study, but if her school has a study abroad program (or an international internship), you could provide her with the chance to live in another country for a semester.  I really want my kids to have the chance to experience living in another culture, even if just for a little while.

[DoubleDown]

I agree with all the advice above, all are nice suggestions. I do think it would be great to let your daughter benefit from the scholarship by investing the money for her so that she can use it later, or for educational pursuits now or in the future. Honestly though, I'd wonder about splitting it. If you are paying the major freight, it seems like you should get some benefit too.

[MorningCoffee]

My first thought was a 50-50 split. You could let her pick what to do with her half, and you get to keep some of your own money. It still gives your kids an incentive to work hard in school, it let's them take on some responsibility for their education/living expenses, while instilling respect for the fact that you are paying for their education.

[chatsc]

a friend's parents saved up $$ for both their kids to go to school.  one kid went away to school and used up the whole $$.  one kid stayed home, and worked and only used $.  the parents gave the kid who used only $ the other $ when he bought a house, to add onto his already saved up down payment.  very fair, i thought.

[Nudelkopf]

My parents let me keep any scholarship money for my own savings, and continued to pay my rent+groceries regardless. Which is pretty handy, because now I have savings that I'm living off for my final year of uni (my parents said they'd pay my rent for 4 years of an undergrad+honours degree)(I'm doing a teaching post grad degree now). And I'll still have saving for setting up in a new city when I start working next year.

[MrsPete]

Sounds like we're all not too far apart in thought -- just the details vary.  I hadn't particularly thought to myself that it's essentially a 50-50 split, but that's how I think it's going to work out.  And as for her choosing, a car is what she really wants -- and needs -- before she hits student nursing as a junior. 

Thanks!

[homeymomma]

If you don't actually need it, she would probably really appreciate it a little bit down the line. With a good car and a good job, she'll be in a great place after graduation, but if she's very responsible wouldn't it be great to give her a little leg up on her own savings later? You could agree with her that it would go into a Roth IRA, or be saved for a wedding/downpayment. But if you don't need it, it will probably make a world of difference to her in the not too far future.

(I'm a recent nursing grad! Congrats to her!)