What are your thoughts on saving for kids education....

[newgirl]

... vs debt payoff vs retirement savings vs full on push to FIRE?

I have an 18 month old and am struggling a little bit with what to do about her college money. I took on a good (but not 6 figure outrageous) amount of student loans to get my degree, and I don't want that for my daughter. However, it's hard for me to think through were college savings belongs in our financial plan, how much to save, and where to save it.

I like the tax advantages of 529 plans, but LO isn't going to be heading to college for 17-18 more years at the earliest. What is higher education even going to look like then? What if she doesn't want to go to college but wants to learn a trade? What if she doesn't want to learn a trade but wants to start her own business? 529 money is locked up for traditional college (I think? Or am I wrong?) and that would reduce future flexibility. I have no idea what my kid will be like in 18 years, and she may want nothing to do with college.

The other factor is that I'm still paying off student loans, and we would like to save for a 20% down payment on a house, AND I would like to save as much as I can for retirement, maxing out 401k and HSA is my minimum goal for this year. Those things leave less money on the table for college.

One thought I had is that we're currently paying $1400/month for daycare. Once she's out of daycare and into public school, that frees up the money and we could just start investing it in a taxable account with tax efficient investments then. She will attend her current daycare/school through kindergarten, so that's 4-5 years down the road when this money will be freed up. However, I have to think that if we shifted $1400/month from daycare to "future opportunity fund for daughter" investments, it wouldn't be too hard to build up a sizeable nest egg for her at $16,800 per year.

I don't know, obviously I have a lot of scattered thoughts. I want my student loan debts GONE and I at least want my retirement minimally funded (to me that means maxing 401k and HSA but not necessarily contributing to any other accounts) every year. I would also like my modest single family house with a big food garden. I also want to be able to support my daughter when opportunities come her way.

How do you balance and think about these different priorities? How does your family save or plan for higher ed/future education expenses?

[newgirl]

MOD EDIT: Merged duplicate topics.

[RWD]

Secure your own future first. Your kids will be happier not having to worry about their parents' finances than they will about not having to pay for college. I also believe one values their education more when they are the one paying for it.

[Laura33]

First, recognize that there is no sure thing.  You make the best choices you can with the information you have, and some of them will be wrong despite your best efforts.*  So don't sit and spin while you try to figure out the "perfect" choice.  All of the things that you list are good and valid goals, and so whichever way you choose to allocate your money amongst them will be infinitely better than frittering it away on crap.  And to the extent you need permission from a stranger on the internet, I hereby give you permission to put your money towards whichever of those options makes the most sense to you.  Yay you!

Second:  have you checked the investment order post?  Sorry, I don't know where it is, but it is very frequently linked to here so shouldn't be too hard to find.

Personally, I put maxing out the available retirement vehicles over and above everything except very high-interest debt.  The magic of compounding means that the earlier you can put this tax-deferred money away, the more significant the impact on your future (e.g., if you start a decade earlier and get 7% returns, your money will be double what it would be if you start a decade later).

But note that this is also true for 529s as well.  To me, they are a lower priority than 401(k)s/IRAs, because (i) your retirement comes first, and (ii) you don't get a federal tax deduction (and in some cases not even a state one).  But: they do provide significant financial benefits (they basically function like a Roth for education expenses, with the added bonus that some states give you an immediate tax deduction, too).  So to the extent you do plan to fund all or part of your kid's(s') education, they are a great deal. 

I also think your concerns about 529s are both common and overblown.  There are many, many things that 529s can be used for (including trade schools, btw, and now private high schools); if one kid doesn't need it, you can roll it over to another kid, or any other relative's kid; and even if you don't use it for educational purposes, you just pay the taxes (that you would have paid anyway in any other account) + a 10% penalty -- but that all is only on the growth in the account.

Doesn't mean you should do a 529, though!  Definitely look at the investment order post, but you are the only one who can figure out your own priorities.  Choosing is hard.  But there will always be choices, no matter how much money you have, so consider this good practice.  :-)

*Ex:  When my work first allowed a Roth 401(k), I jumped:  we had most of our retirement money in t401(k)s, so I wanted the tax diversification; we make sufficient money that we can afford the taxes now, so that choice felt like "pre-paying" retirement taxes while our cash flow was high; and I was convinced that in a few years, Hillary was going to have to jack up our taxes to balance the budget and pay the debt and so my tax rate would be higher in retirement.  Uhhhhh, WRONG!  My future tax rate just went down quite significantly.  At least if the current rates stay where they are -- and since they are scheduled to expire in 5 years, I *still" don't know!

[EricEng]

You can use the 529 funds at an accredited trade school, community college, or traditional college.  You can also transfer it to another child without penalty if she doesn't do any or use it up.  Surely someone in your family will go to college (neice, nephew, etc).  If nothing else, you could pay for it and they could gift you back the amount to help you get the money out tax free.

That said, college doesn't have to be 6 figures or even close.  Most 4 year public instate schools can provide a good degree for $20-40k excluding room/board (stay at home maybe?) which I think is fair because we all have room and board expenses for our whole life.  Side Rant: It doesn't make sense to consider room/board part of the cost of the degree, you pay it whether they got to school or not.

I've got a newborn who I've been putting money into a 529 for already.  If not him, then the next will use it.  College isn't going away.  It is only becoming more and more critical for solid careers.  Yes, there are worthless degrees, but most good careers benefit from a degree.

I know there are differing opinions on this board, but I find paying for their college to be a huge boon.  The child's job is to go to school and learn.  Wasting years of their life working part time for minimum wage while juggling school is not efficient use of their time.  A little min wage work is good for them to appreciate the alternative to school though and helps motivate.  My parents did it for me with their higher earnings per hour and I will pass that on to my children.

[bognish]

My order of savings is emergency fund, high interest debt, retirement, other debt, the 529. If you can do it all then great, but otherwise focus on your retirement and school loans first. As kids college gets closer you will have a better estimate of potential costs. If you have been a mustachian saver for 10 years you should have retirement well funded and other debts paid off. Diverting those funds to 529/college for high school and college years should cover alot of college costs.

[Nangirl17]

We just put in whatever the max is to get government match (We're in Canada, so it is a little different here). It won't be enough to pay the entirety of his tuition and room and board but:
   a) if we want to we can take money from our other accounts for that (we have non-registered investments that we could use)
   b) he can work for it! My dh got through uni debt free (I almost did - the last 6 months I needed a sizable loan for a car and internship expenses and to hold me over until first paycheque) so we know it can be done without a lot of mommy-daddy support!

[Plugging Along]

Here are my equally  random responses and thoughts

I like the tax advantages of 529 plans, but LO isn't going to be heading to college for 17-18 more years at the earliest. What is higher education even going to look like then? What if she doesn't want to go to college but wants to learn a trade? What if she doesn't want to learn a trade but wants to start her own business? 529 money is locked up for traditional college (I think? Or am I wrong?) and that would reduce future flexibility. I have no idea what my kid will be like in 18 years, and she may want nothing to do with college.

I am not in the US so can’t speak to the advantages or details of the 529 of mentioned.however, do any of us know what our kids are going to want or not want todo in the future,   Heck, they sometimes don’t know what they want to do for week.    That being said, it doesn’t mean we still can’t be ready for the future.    We still save for our children’s education because for us, it would be worse if they want to school and choose not to because of money.  I wish I would have just c9ntinurd with my masters, but $ was a concern so I stopped.   For us, because we are in the position to do so, we have plan to assist up to their first post graduate.  If they don’t go, we will collapse the fund, and it will go  to something else.   

In terms of if they go to college are not, there are studies that indicate the parents expectations and views are one of the larger indicators on of they go to higher education.  It’s not the only factor, as the kids ability is one too, but in our house our kids are expected to go, they don’t even think it is an option

This is really up to you on how you view education, but I honestly would try to figure out exactly what the child’s views are, but view it as in cases where I can, I will try to remove barriers so my kids have as many options as possible. 

The other factor is that I'm still paying off student loans, and we would like to save for a 20% down payment on a house, AND I would like to save for retirement, maxing out 401k and HSA is my minimum goal for this year. Those things leave less money on the table for college.


This is a tough one for priorities.  We are fortunate that we were able to do most of it as we had our kids a little later with no debt.   My order of priorities would be
1. Eliminate debt, if it’s interest is more than what you would get from investing in a 529.  If there I still a government grant or something of free money, that would be different.   I always take te free money,  I would pay off my student loans and any other debt. 

2. Can you buy a smaller house?  I had my house just before kids, hence why we waited a little longer. 

3.  You can’t borrow for retirement, but kids can borrow for higher education.  So this would be m6 next priority before the kids higher education.  You don’t want to have to rely on your kid so 8 think being financially secure gives my kids security.  That being said, I am also willingly to work longer instead of RE.   That’s my balance.   If i didn’t have kids or worried a
About thei future I could probably be retired by now (in my 40’s). However, I 0lan t9 work until they are out of school.  I essentiall6 choose to give up ER (FI) for the most.

One thought I had is that we're currently paying $1400/month for daycare. Once she's out of daycare and into public school, that frees up the money and we could just start investing it in a taxable account with tax efficient investments then. She will attend her current daycare/school through kindergarten, so that's 4-5 years down the road when this money will be freed up. However, I have to think that if we shifted $1400/month from daycare to "future opportunity fund for daughter" investments, it wouldn't be too hard to build up a sizeable nest egg for her at $16,800 per year.

This is a great idea.   Just because you are not able to save for the kids now, it doesn’t mean that when the big expenses like daycare end, you can’t reallocate.  We did that. We added more as major expenses went down.   That being said, don’t forgot as they get out of childcare costs, there are other costs.  We didn’t put nearly as much as we thought, but definately more.

How do you balance and think about these different priorities? How does your family save or plan for higher ed/future education/future kids opportunity expenses?

It’s going to be different for each family depening on what is important to yours.  For me, I don’t mind working longer to be able to do everything else.  That’s be
Asked on my values of not having to worry when I retire, i would rather have more than Ineed than worry about not enough for a longer time.  Same with it’s important for me that m6 kids can go for higher education.  I care less about the size of my house, so bought much smaller than we could have affordeded. 

I think you need t9 decide wha5 are the most important things and go from there. 

[moof]

My random thoughts...

We set up a 529 around age 1, and gradually moved to maxing out the state deduction around age 2.5.  There is not ~19k in the 529, and this will likely grow to ~100k in todays dollars by time it is used if we stick with our current FIRE plans.  Our contributions account for about 10% of our savings rate.  We have a 15 year mortgage with 13 years left, and will still have 6 years of that after the target FIRE date.

I am not going to sacrifice my retirement to pay for college, but I also don't want my kid to bear the full burden.  I worked student jobs and summer jobs to get my degree with only room/board help from my parents and still ended up with $14k of student loan debt.  I don't want a trust fund kid, but I would like there to be enough set aside to assure that he can go to a decent school and not have a lost decade of debt burden.

I see no right answer here, other than to say that I've seen lots of kids crushed by debt, and many other aimless ones as a result of excess spoiling and low expectations.  We are aiming for some sort of middle ground.

[MDM]

How do you balance and think about these different priorities?

At some point I heard the "oxygen mask" analogy and that seemed reasonable enough to include in Investment Order.  YMMV.

Although, if circumstances allow, Where to start a child's Roth IRA with very low income? may be worth considering.

[vivian]

My priority order is: debt, normal age retirement, college savings, early retirement. We already had a house before kids, but I would put it before college.

I agree that helping kids with college is a priority, but not one that should put my own financial life at risk. We max out retirement accounts and put some away in 529 , although not that much. It is hard to predict even roughly what will be needed then.


Sent from my iPhone using Tapatalk

[TheWifeHalf]

My 3 kids are proof that a child can be raised from a very young age, with the knowledge that they are going to have to (and will WANT to) support themselves when they get to be an adult. They knew that things cost money. They also knew that some jobs paid more than others, and that some jobs required more schooling beyond high school, and that schooling cost money.

We spent their childhood exploring different things, letting them explore new interests, making sure they knew when they joined something, they had to finish out the year, or season, or whatever time length it was. If they didn't want to do something anymore, they knew they could try something else.

As they got older, they knew that there were ways to get the money for whatever kind of schooling they decided after high school, if any.
They knew that Daddy had a job where he got paid money, and that's how we bought things.

They knew they got an allowance from that money that Daddy got paid, and part of that money went into their college money in the bank. We took them over to actually meet the people who work at the bank, and they got to know them (We live in a very small town with one stop sign and one bank and one post office) Part 2 of their allowance was theirs to do with as they chose, and part 3 went into an envelope and they had to talk to Mom or Dad to discuss what they wanted to do with it.

Daddy had his job, theirs was to go to school

There was no 529 back then, the kids are 29-32 now, but Ohio had a Tuition Trust program then, no more. We could save as much as we wanted for each kid and buy college credits at the current price, to buy the same number of credits when they went to school. We took it off our taxes when we bought the credits and they had to use them at an Ohio school. We had enough to buy each kid a year's worth when they  were 1-2 and as was allowed the kids could give their money to each other - good thing, it ended up 2 didn't use theirs and gave it to the other. Those 2 took advantage of other things that made college free.

They all knew they had to do well at their job, school to get 'paid' the same way Daddy had to do well at his job to get paid. Fortunately, they all did. In fact our daughter is an RN right now, and works at a hospital that pays for her classes and she plans to go to pharmacy school.
2 of the kids took advantage of a local community college's offer of paying for 2 years if there grades were at a certain level in high school and the 3rd tested into the nuclear propulsion program in the Navy (requires some brains)

All 3 are making 80-90000 and seem well adjusted, happy adults.

The point of it all?  Raise your daughter so she wants to do well in school. Expose her to various interests in this world. As she gets older, be alert to various resources to help her if further schooling is the way she wants to go, and enjoy being part of her trip to adulthood!

[Gin1984]

First, recognize that there is no sure thing.  You make the best choices you can with the information you have, and some of them will be wrong despite your best efforts.*  So don't sit and spin while you try to figure out the "perfect" choice.  All of the things that you list are good and valid goals, and so whichever way you choose to allocate your money amongst them will be infinitely better than frittering it away on crap.  And to the extent you need permission from a stranger on the internet, I hereby give you permission to put your money towards whichever of those options makes the most sense to you.  Yay you!

Second:  have you checked the investment order post?  Sorry, I don't know where it is, but it is very frequently linked to here so shouldn't be too hard to find.

Personally, I put maxing out the available retirement vehicles over and above everything except very high-interest debt.  The magic of compounding means that the earlier you can put this tax-deferred money away, the more significant the impact on your future (e.g., if you start a decade earlier and get 7% returns, your money will be double what it would be if you start a decade later).

But note that this is also true for 529s as well.  To me, they are a lower priority than 401(k)s/IRAs, because (i) your retirement comes first, and (ii) you don't get a federal tax deduction (and in some cases not even a state one).  But: they do provide significant financial benefits (they basically function like a Roth for education expenses, with the added bonus that some states give you an immediate tax deduction, too).  So to the extent you do plan to fund all or part of your kid's(s') education, they are a great deal. 

I also think your concerns about 529s are both common and overblown.  There are many, many things that 529s can be used for (including trade schools, btw, and now private high schools); if one kid doesn't need it, you can roll it over to another kid, or any other relative's kid; and even if you don't use it for educational purposes, you just pay the taxes (that you would have paid anyway in any other account) + a 10% penalty -- but that all is only on the growth in the account.

Doesn't mean you should do a 529, though!  Definitely look at the investment order post, but you are the only one who can figure out your own priorities.  Choosing is hard.  But there will always be choices, no matter how much money you have, so consider this good practice.  :-)

*Ex:  When my work first allowed a Roth 401(k), I jumped:  we had most of our retirement money in t401(k)s, so I wanted the tax diversification; we make sufficient money that we can afford the taxes now, so that choice felt like "pre-paying" retirement taxes while our cash flow was high; and I was convinced that in a few years, Hillary was going to have to jack up our taxes to balance the budget and pay the debt and so my tax rate would be higher in retirement.  Uhhhhh, WRONG!  My future tax rate just went down quite significantly.  At least if the current rates stay where they are -- and since they are scheduled to expire in 5 years, I *still" don't know!

Not just high school, K-12.

[newgirl]

My 3 kids are proof that a child can be raised from a very young age, with the knowledge that they are going to have to (and will WANT to) support themselves when they get to be an adult. They knew that things cost money. They also knew that some jobs paid more than others, and that some jobs required more schooling beyond high school, and that schooling cost money.

We spent their childhood exploring different things, letting them explore new interests, making sure they knew when they joined something, they had to finish out the year, or season, or whatever time length it was. If they didn't want to do something anymore, they knew they could try something else.

As they got older, they knew that there were ways to get the money for whatever kind of schooling they decided after high school, if any.
They knew that Daddy had a job where he got paid money, and that's how we bought things.

They knew they got an allowance from that money that Daddy got paid, and part of that money went into their college money in the bank. We took them over to actually meet the people who work at the bank, and they got to know them (We live in a very small town with one stop sign and one bank and one post office) Part 2 of their allowance was theirs to do with as they chose, and part 3 went into an envelope and they had to talk to Mom or Dad to discuss what they wanted to do with it.

Daddy had his job, theirs was to go to school

There was no 529 back then, the kids are 29-32 now, but Ohio had a Tuition Trust program then, no more. We could save as much as we wanted for each kid and buy college credits at the current price, to buy the same number of credits when they went to school. We took it off our taxes when we bought the credits and they had to use them at an Ohio school. We had enough to buy each kid a year's worth when they  were 1-2 and as was allowed the kids could give their money to each other - good thing, it ended up 2 didn't use theirs and gave it to the other. Those 2 took advantage of other things that made college free.

They all knew they had to do well at their job, school to get 'paid' the same way Daddy had to do well at his job to get paid. Fortunately, they all did. In fact our daughter is an RN right now, and works at a hospital that pays for her classes and she plans to go to pharmacy school.
2 of the kids took advantage of a local community college's offer of paying for 2 years if there grades were at a certain level in high school and the 3rd tested into the nuclear propulsion program in the Navy (requires some brains)

All 3 are making 80-90000 and seem well adjusted, happy adults.

The point of it all?  Raise your daughter so she wants to do well in school. Expose her to various interests in this world. As she gets older, be alert to various resources to help her if further schooling is the way she wants to go, and enjoy being part of her trip to adulthood!

I appreciate the time it took to type your thoughts - however I'm really not asking for advice on how to raise my child(ren) or what attitudes I should try to instill in them. I'm asking specifically how people prioritize college or other saving for their children vs other important needs, and what things they consider when setting those priorities.

[newgirl]

Thanks everyone for your thoughts - I knew the 529 plans were transferrable but didn't realize you could use them for trade schools or even private/charter K-12 education. That does open up some doors.

After reading all of the feedback, I think what I am going to do is this:

Remove budget line item for daughter college fund
Funnel that $$ into attacking student loan debt
Get 401k and HSA set up so I'm maxing out every year
Get individual IRA set up so I'm maxing out every year

Once student loan is gone and retirement is being maxed on autopilot, I'll reconsider opening a 529 plan. I agree with the comments that you have to put your own oxygen mask on first. I won't be doing my kid any favors by not taking care of my own future.

We'll balance contributions to this account with contributions to house down payment fund - may choose to fund house down payment more robustly and then once DD is out of daycare start using that money to build her nest egg.

[I'm a red panda]

I prioritize retirement over college savings- you can't take out a retirement loan.
I don't have debt, so that isn't a consideration in my savings.

That said, I fully plan to pay my child's college expenses.  We have a 529, but we only put about $3,000 in it the first year, so we aren't putting huge amounts in.

[Mississippi Mudstache]

My parents had four kids. They paid for our housing during college, and nothing else. We were responsible for the rest. Only one of us ended up with a significant amount of college debt (my older brother, ~$35K). We had scholarships to cover tuition and books, and we worked for food/utilities/beer money. My wife had $36,000 in college debt, but we paid that off in less than a year. It's hard for me to imagine how people end up with unmanageable debt loads from college. Long story short, I don't think about my kids' college savings.

[Cgbg]

My dad paid all of $500 or so for my college expenses. I took out federal student loans to pay my way through. I eventually paid off those loans. DH’s parents paid his way through. When we decided to have kids, we agreed that we would cover their education costs. We always maxed out dh’s 401k contributions, and there were years we couldn’t put much at all in the 529 plans.

As the kids grew, we made sure they understand that we would cover the cost of the instate universities (state flagship cost) or the equivalent. If they wanted to go to college out of state, they’d need to earn merit to make up the difference. Because we didn’t want them to start their lives with debt, we told them no student loans.

Oldest kid is attending a college back east that costs $45k/year. This term he got a refund of $91 (we paid $0). Youngest kid attends a college in the west that costs $36k/year (these are room/board, tuition, fees costs.) we pay about $7k/year. We give them $200/mo each and they both work as they want, pretty much at least doubling what we give them. (One kid spends very little of his earnings and its fun to watch his accounts grow.)

Our state flagships would be $26k/year. They couldn’t commute to make it cheaper. Just be aware that college costs are much more than they were back when you went to school. We will pass their 539s on to them eventually- when we no longer want to take the state deduction each year. (We cash flow the costs rather than spend the 529 $.)

I went back to work when they were in middle school to make sure we’d be able to hold up our end of the bargain.

[soccerluvof4]

I prioritize retirement over college savings- you can't take out a retirement loan.
I don't have debt, so that isn't a consideration in my savings.

That said, I fully plan to pay my child's college expenses.  We have a 529, but we only put about $3,000 in it the first year, so we aren't putting huge amounts in.

This^+1 whats leftover put into 529. If its not seemingly enough you will find ways if important enough to do so but some money going in is better than none.

[MEJG]

We are saving for our retirement first. We do have 529s for the kids but don’t max them out by any means. We have given grandparents and other relatives that have asked for the info deposit slips for their 529s.

Our plan is to give each kid $100,000 for higher education (inflation adjusted starting the year the oldest goes to college), any costs over that are on them and any left overs will be gifted to them when they hit 30 yrs old.

Based on our current trajectory it will delay RE but not by much as we will be able to cash flow $25,000 per year per kiddo if we don’t have it set aside by the time they hit college age.

We see minimizing taxes and tax sheltering our current income as significantly more important right now. Our plans may change based on grandparents- while we are not relying on it they have made noise about helping for college. Our eldest is 7- so we will start talking about these things more in depth in a few years when he hits high school.

We also plan to help them set up Roth IRAs and match their contributions and that will be immediately prioritized over saving for college- and cash flowing college instead. We want to instill the saving and investing habit in them early!

[MrsPB]

Others have touched on the bigger questions but I just wanted to highlight that although daycare costs end when they go to school, childcare costs ( for us anyway) do not end. I have two in full time daycare right now. My oldest will be starting school in Sept but still requires before and after care which is over half of the current full time daycare cost per month. That doesn’t include any paid care required on professional development days when school is closed (they have these once a month during the school year), and care during summer holidays and March break, for example. Care for a week in a day camp or similar is around $200 per child. Add all that up (we have no family to help out and my husband’s low seniority at work means he can’t hold vacation during school vacation time. I get 3 weeks vacation a year but for various reasons, not much is left during school holidays) and it is almost the same amount per year for her care as now. I’m highlighting this as we are currently trying to determine our finances for when we start transitioning out of daycare. For us anyway, it’s not the huge reduction in childcare outlay that I originally had anticipated.

[boarder42]

My thoughts. Money is fungible. And until you're maxing all the tax advantaged space available to you, you shouldn't even consider a 529. Take care of yourself and your student loans and your retirement accounts before you consider a 529.

If that's all taken care of then you could look at a 529 but you'll likely save more money and have more in retirement if you max your tax advantaged space first. Which would allow you to help fund your child's college if you feel like it when they get there

[MEJG]

Others have touched on the bigger questions but I just wanted to highlight that although daycare costs end when they go to school, childcare costs ( for us anyway) do not end. I have two in full time daycare right now. My oldest will be starting school in Sept but still requires before and after care which is over half of the current full time daycare cost per month. That doesn’t include any paid care required on professional development days when school is closed (they have these once a month during the school year), and care during summer holidays and March break, for example. Care for a week in a day camp or similar is around $200 per child. Add all that up (we have no family to help out and my husband’s low seniority at work means he can’t hold vacation during school vacation time. I get 3 weeks vacation a year but for various reasons, not much is left during school holidays) and it is almost the same amount per year for her care as now. I’m highlighting this as we are currently trying to determine our finances for when we start transitioning out of daycare. For us anyway, it’s not the huge reduction in childcare outlay that I originally had anticipated.

Off topic to this post but MrsPB have you thought about a nanny or au pair?  We've found the math works best for in-home care with providers who will watch sick kids now that we have a mix of school aged and younger kids.  We pay $16/hr for the hours we use for a great nanny, no worrying about illness, school days off, camp etc.  Rates in your area will be variable of course. For both parents working FT (we're currently at one FT and one PT) and Au Pair made more sense financially but currently a nanny works best to reduce expenditures for child care for us.

[Zamboni]

I have a different approach for college savings than most of the posters here. For me, it is the thought that counts.

In my case, 529's were front loaded with $3000 per child (the minimum to open a Vanguard 529), and since then I auto-invest to kick in a little every month. No enough that it affects my other savings plans, but enough that it has gradually built up over time.

In the end, will it cover everything for four years at the most expensive school in the nation? No way. But, I want them to know I care about them going to college, and that I will do what I can to support them, so saving in a way that is earmarked for them is one way of showing that.

It is also okay for me if they don't go, or if only one of them goes. I talked to financial advisors from Vanguard about the rules for pulling out or transferring 529 money, and it is clear that there is a lot of flexibility and contingencies that allow for this. It also can be used for trade school, etc.

So, for me, it is the right thing to do by my kids. If it means it takes me one or two years to get my retirement accounts where I need them, so be it. I'm going to be able to retire early in any case barring catastrophe.

My own parents had a total disconnect in this regard. They made it clear that they fully expected me to attend college, and my Mom especially made it clear that she would view me as a disappointment if I didn't go. But they hadn't saved a dime for it. Like, not even a token effort . . . it was all on me. I could earn minimum wage, and that's what I did starting in high school. It is simply not possibly to earn that amount of money and even make a dent in college costs where I went to school. So fuck that, and thanks for nothing on college, Mom.

[simonkkkkk]

That is a great idea!

[Nick_Miller]

@newgirl, my wife and I would love to put away more for our kiddos' education, but as others started, we feel it's a good start to make sure they won't have to take care of us when we're older. Right now, my mom is in bad shape (financially and healthwise), and she'll likely be a drain on us for the rest of her life. My MIL might be going down a similar path.

My point is that this is a huge....I won't say burden, but it's a huge curveball as we try to get our financial house in order. So I want to make sure my wife are not burdens on our kiddos in 20 years.

Second, we're more than willing to do things like let them stay at home (probably rent free), provide home-cooked meals, provide guidance and advice, and perhaps even float them a small monthly allowance to help with incidentals. But we won't be able to pay for their tuition. I told my oldest last night at dinner, "Your job is to get scholarships. That's your job for the next 5 years." I don't really care if she works during high school; I'd rather her spend all her waking hours studying, prepping for tests, applying for scholarships, and volunteering.

And just because I feel like I should introduce myself, given our screen names,

"Hey I'm Nick Miller. I've done things. Like write half a book about zombies."

[Michael in ABQ]

We have 5 kids, the oldest is 9 and really don't have anything saved for college aside from some savings accounts for extra birthday money, etc.

I'd love to put some money in an Education Savings Account or 529 plan for all of them but right now our priority is saving up for a down-payment on a house. We just got out of debt about a year ago and have our emergency fund saved up so now we can start putting aside a bit more for retirement and saving for a house. I'd like to help my kids but $1 in a Roth IRA today is going to have 30-50 years to grow while $1 in a 529 might only have nine years before it's taken out and spent.

Worst case scenario they save up money by working in high school, work during college, and spend lots of time applying for scholarships. Or they can follow in my footsteps and join the National Guard or go active duty.

I would focus on paying off your debts before worrying about saving for college. Losing a few years of compounding hurts but would you rather have that money compound for decades towards your retirement or 15-20 years for her college? When the time comes you can always just cash flow it and cut down on other savings for those few years. Dropping your retirement contributions 17 years from now will hurt you less than dropping it now.

[Domigab]

Secure your own future first. Your kids will be happier not having to worry about their parents' finances than they will about not having to pay for college. I also believe one values their education more when they are the one paying for it.

This is my opinion. My husband and I have 2 associate's, 2 bachelor's, and a master's degree between the two of us. We have student loans for the latter degrees and paid out of pocket for our earlier degrees. I agree that you take it more seriously if your are paying out of pocket. My goals are building a rainy day fund, paying down debt, and early retirement. We have a small amount of money saved for college for our three kids. I hope that our finances will improve so that we can contribute more. Tuition has grown 400% in the past 30 years https://www.theatlantic.com/business/archive/2017/07/college-bubble-ends/534915/ . I am waiting for the tuition bubble to pop. My husband is a Veteran and wishes he had entered the military earlier. He waited until after he had his bachelor's degree.  I have thought about entering the National Guard as a way to repay some of my loans. We live near a large community college that both my husband and I went to. My main goal is to have an honest conversation about tuition costs and the effects of interest with my kids. I went into college blind without the guidance of my parents and was lucky to figure it out on my own.

[oldladystache]

I never saved for college, or for retirement, or for anything else. I just saved. When it was time to pay for college, it came from current income and savings. When I bought a house the down payment came from savings. Now that I'm retired, income comes from savings.

[formerlydivorcedmom]

One key thing is for you and your spouse to agree on how much financial support you want to provide for your child.  All expenses paid to an Ivy League school?  One semester tuition at community college?  There's no wrong answer, but you need to have some sort of goal/plan there.  That will help you estimate how much it will cost later, and then you can prioritize that cost with the other savings goals that you have.

For my particular family, our goal is to provide 8 semesters of tuition/fees/books at a state school.  They can live and eat at home, get scholarships, or work to cover housing.  We estimate that will run somewhere around $50k per kid (we have 3).

So then, it's just a matter of figuring out where that fits with our other financial and family goals.

For you, I highly recommend getting rid of your student loans first.  There's no point in neglecting your loans (and paying interest) just to ensure your kids don't have them in 20 years.

[jinga nation]

The Mrs and I bought lump sum Florida PrePaid 4 year university plans. Kids were 4 and 2 at the time. We did this after maxing out retirement accounts, etc. We looked at the rate of tuition growth and decided to pay it off. With our income, our kids weren't going to get any financial aid (rightly so), only would be able to apply for merit scholarships. They'll have to pay their own way for graduate school or medical or law, etc.
Kids won't get to live rent free, they'll have to earn in working like their old man had to. Ain't no free lunch.
If we do have a rental property near the university they choose to go to, they'll be paying rent, market rate like their roommates.
If they don't use it, I'll get it back, except it'll only go up at the rate of inflation. Small price to pay, but when our NW is eventually 2 commas, we will sleep soundly with missing S&P500 gains on $55k.

[RWD]

If they don't use it, I'll get it back, except it'll only go up at the rate of inflation. Small price to pay, but when our NW is eventually 2 commas, we will sleep soundly with missing S&P500 gains on $55k.

$55k grows to $145k after 15 years at 6.7% (post-inflation) returns. I personally think I'll still care about ~$90k when I'm worth a million.

[jinga nation]

If they don't use it, I'll get it back, except it'll only go up at the rate of inflation. Small price to pay, but when our NW is eventually 2 commas, we will sleep soundly with missing S&P500 gains on $55k.

$55k grows to $145k after 15 years at 6.7% (post-inflation) returns. I personally think I'll still care about ~$90k when I'm worth a million.

Fair point. But the current rate of tuition increases at state universities is abhorrent. So it was either place in 529 plans or lock-in at present rates in a prepaid plan. I had older coworkers who had their kids' 529 plans value drop significantly in 2007 thus insufficient funds for the 4 year bachelors degree. I saw the parental stress on a daily basis fro 2007-2010. I think that risk aversion made me decide to take the markets factor out and go pre-paid. Otherwise we'd have got the 529 Vanguard plan.

[FireHiker]

We have not put anything into a 529 or specific "college" savings. What we have done is max out all of our pre-tax options (401k for both of us and catch-up for my husband, and HSA). We will cash-flow 4 years of in-state or equivalent for the oldest, who graduates high school next year. We have plenty of room in our budget to do so, thank goodness, because we have two high incomes and have adopted several mustachian measures espoused here (with room to do more). If he wishes to go out of state or to a private school, it will be up to him to come up with the difference between scholarships, working, loans.

We also have two younger kids, ages 6 and 8. Because my husband is older, we'll have access to his 401k by the time they're in college. Since our company recently gave us the mega-backdoor roth option, we plan to start taking advantage of that, and will put everything into 401k and mbd roth, with any excess invested in an after-tax account. We also have a ton of equity in our way-too-big house, and we plan to sell and downsize, only using about half of our equity to purchase a smaller home. Between the money we're currently saving in the retirement accounts and the home equity we expect to be able to pay for college for the younger two. Since our state does not give us any incentive to invest in a 529, combined with my husband's age and our ability to pull from his 401k then, we've decided this is the better option for us.

I like what a previous poster listed as their priorities: debt, regular retirement, helping with college, early retirement. Personally I would absolutely make sure pre-tax contributions to 401k and HSA (if applicable) are maxed out before opening a 529. If I lived in a state that gave you a tax break I would then invest in a 529. Otherwise I would probably stick with a general after-tax investment account that could go towards college or early retirement.

[Fin Drill Instructor]

I like the "oxygen mask" analogy. I would take care of myself first: get rid of debt (except for mortgage), start investing in retirement etc. Then, when I am in a better position, I would throw all available extra money towards kids college. I am ok with not paying 100% of everything and I am not going to pay for my kids to party. They will have some money saved by us, they can also apply for scholarships and grants and they can work to pay for their college. And they can go to a state school and live at home. If they decide to live on campus or go somewhere else to school, they will have to work for it a lot more.

[simonkkkkk]

Nice information :)

[Zamboni]

I do not want my kids to live at home during college.

Obviously not everyone agrees with me on that, but I think that going away to live as an autonomous adult (whether to college, the military, or an apartment with roommates and a job) is important for mental development and establishing healthy adult-to-adult boundaries between parents and children.

Since I teach at a university, I get to watch the impact that various levels of employment have on students. Some limited work is okay (like 10-15 hours per week or less) when paired with full time coursework. Athletes "work" more hours that this during the season. Students who don't have to work at all do have an advantage in terms of earning high grades in the most difficult classes. More time spent working than that, and the time to learn outside of class becomes inadequate. As a result, grades suffer, or people end of completely sacrificing things like friends and dating, which I don't think is healthy for someone in their late teens or early 20's. . . . or anyone of any age, really.

Go ahead and tell me your anecdote about how you worked full time and earned straight A's going to school full time while double majoring in biomedical engineering and economics and wooing your current life partner. Well done! Most people can't sustain it.

I'm saving because I am fortunate enough to be able to save. If they earn scholarships, then I get to pull out that money from the 529's without penalty. If not, then at least I can contribute without loans . . . I strongly oppose loans.

[Michael in ABQ]

I do not want my kids to live at home during college.

Obviously not everyone agrees with me on that, but I think that going away to live as an autonomous adult (whether to college, the military, or an apartment with roommates and a job) is important for mental development and establishing healthy adult-to-adult boundaries between parents and children.

Since I teach at a university, I get to watch the impact that various levels of employment have on students. Some limited work is okay (like 10-15 hours per week or less) when paired with full time coursework. Athletes "work" more hours that this during the season. Students who don't have to work at all do have an advantage in terms of earning high grades in the most difficult classes. More time spent working than that, and the time to learn outside of class becomes inadequate. As a result, grades suffer, or people end of completely sacrificing things like friends and dating, which I don't think is healthy for someone in their late teens or early 20's. . . . or anyone of any age, really.

Go ahead and tell me your anecdote about how you worked full time and earned straight A's going to school full time while double majoring in biomedical engineering and economics and wooing your current life partner. Well done! Most people can't sustain it.

I'm saving because I am fortunate enough to be able to save. If they earn scholarships, then I get to pull out that money from the 529's without penalty. If not, then at least I can contribute without loans . . . I strongly oppose loans.

I didn't work in college but I really should have. I wasted a whole lot of time watching TV and movies with my roommates, playing video games, drinking, etc. I did earn some money from the National Guard but that was only one weekend a month and two weeks in the summer so it was maybe $4,000 a year. My deployment right after starting my sophomore year basically paid for the rest of college. Had about $12k saved up from those six months on active duty plus I became independent for FAFSA and started getting grants since I only had $4k a year in income. It meant graduating a year later than originally scheduled but it was definitely worth it. Alas in my youth and stupidity I took out student loans to invest in the stock market. Worked fine until 2007-8 when my portfolio that was very heavy in individual financial stocks dropped from about $15k to $6k. Taught me an important lesson about not trying to pick individual stocks and just going with broad index funds (and not borrowing money to invest in the stock market). I also invested another $6.5k in two small businesses that my roommates were involved in. One ended up going bankrupt so I lost it all, the other I got out maybe $100 of my original $3,000. Once again, lesson learned.

[Strawberry]

I didn't read all the advice, some of which is clearly going to be better than mine, but I spun and spun just like you. So, I'm sympathetic. My husband and I finally decided we'd just take whatever we got each year in a tax refund and slap it into our daughter's (now 28 months) 529. Is it a savvy strategy? I don't know, but it's what we could do without tying ourselves in knots about the tradeoffs between saving priorities and the debates about whether it's better to pay for your own college or have your parents pay for it. As it is, she'll have a little bit of money that we can easily afford. And if she wants to join the circus, we'll be fine.

[newgirl]

I do not want my kids to live at home during college.

Obviously not everyone agrees with me on that, but I think that going away to live as an autonomous adult (whether to college, the military, or an apartment with roommates and a job) is important for mental development and establishing healthy adult-to-adult boundaries between parents and children.

Since I teach at a university, I get to watch the impact that various levels of employment have on students. Some limited work is okay (like 10-15 hours per week or less) when paired with full time coursework. Athletes "work" more hours that this during the season. Students who don't have to work at all do have an advantage in terms of earning high grades in the most difficult classes. More time spent working than that, and the time to learn outside of class becomes inadequate. As a result, grades suffer, or people end of completely sacrificing things like friends and dating, which I don't think is healthy for someone in their late teens or early 20's. . . . or anyone of any age, really.

Go ahead and tell me your anecdote about how you worked full time and earned straight A's going to school full time while double majoring in biomedical engineering and economics and wooing your current life partner. Well done! Most people can't sustain it.

I'm saving because I am fortunate enough to be able to save. If they earn scholarships, then I get to pull out that money from the 529's without penalty. If not, then at least I can contribute without loans . . . I strongly oppose loans.

This is very much in line with how I feel. It's not reasonable in today's world IMO to work enough hours to pay your college costs without sacrificing either grades or health or personal growth. I tried it my first year of college and ended up having to drop out for a while. Grades absolutely suffered. I'm not opposed to working a reasonable number of hours (like <15) or doing work-study or something like that but if my kid is attending college full time then that should be her "job". 

I feel like the goal of saving enough to be able to afford 4 years of in-state public college is a reasonable one, with kid responsible to pull in some scholarship money and work a manageable number of hours.

[mm1970]

I do not want my kids to live at home during college.

Obviously not everyone agrees with me on that, but I think that going away to live as an autonomous adult (whether to college, the military, or an apartment with roommates and a job) is important for mental development and establishing healthy adult-to-adult boundaries between parents and children.

Since I teach at a university, I get to watch the impact that various levels of employment have on students. Some limited work is okay (like 10-15 hours per week or less) when paired with full time coursework. Athletes "work" more hours that this during the season. Students who don't have to work at all do have an advantage in terms of earning high grades in the most difficult classes. More time spent working than that, and the time to learn outside of class becomes inadequate. As a result, grades suffer, or people end of completely sacrificing things like friends and dating, which I don't think is healthy for someone in their late teens or early 20's. . . . or anyone of any age, really.

Go ahead and tell me your anecdote about how you worked full time and earned straight A's going to school full time while double majoring in biomedical engineering and economics and wooing your current life partner. Well done! Most people can't sustain it.

I'm saving because I am fortunate enough to be able to save. If they earn scholarships, then I get to pull out that money from the 529's without penalty. If not, then at least I can contribute without loans . . . I strongly oppose loans.

This is very much in line with how I feel. It's not reasonable in today's world IMO to work enough hours to pay your college costs without sacrificing either grades or health or personal growth. I tried it my first year of college and ended up having to drop out for a while. Grades absolutely suffered. I'm not opposed to working a reasonable number of hours (like <15) or doing work-study or something like that but if my kid is attending college full time then that should be her "job". 

I feel like the goal of saving enough to be able to afford 4 years of in-state public college is a reasonable one, with kid responsible to pull in some scholarship money and work a manageable number of hours.

I feel like Jekyll and Hyde when I think about it, and when I talk with friends about it too.

I have several friends with kids the same ages as ours.  And they have no college funds, and no plans to save for one.  These are UMC folks, and the answer is "we paid our own way, they can too".  Which, I can understand, to an extent.

There are many ways to pay your own way, including military, going to community college, living at home, having a job, etc.  I've done some, friends have done some, etc.

However.

I lived away at college.  So did my spouse.  I went to an expensive private school.  So did my spouse (partly on the military's dime though).  Though I see the advantage of having my kid go to the community college for free 2 years then move on to University for 2-3 years - bonus he could live at home and save BANK.  Um...I didn't do that?  And there's something to be said for living AWAY to become a grown up.  Because, when he's 22 and done with college, is he REALLY gonna want to boomerang back home to sleep in the top bunk with his 16 yo brother below?  Probably not.

The other thing to consider - my family was poor.  Hubby's middle class.  My friends with no college savings?  Also poor.  Sure they got scholarships - they are very bright, as are their kids.  We are all engineers, and many of them have PhDs.  But their parents were poor.  They are NOT.  They make $250-300k+ per year.  Your kids are NOT getting need-based financial aid!


So, in short:
1.  I max out my retirement accounts.  I started putting money into retirement at 22 while paying off college loans.  Paid off loans at 26.  Maxed out retirement accounts soon after.  This is more important than college money.

2.  I put a little extra money into our mortgage.

3.  I put money into 529s.  But just a little bit. 

4.  Everything else just goes into investment accounts.

Pay off your loans and max retirement FIRST.

Your kids should work while in school but it won't be enough to bankroll their whole degree.  That's ok.

As far as loans go, I don't think students should borrow more than, say, 1-2 years of what a typical starting salary would be.

[RFAAOATB]

Whatever meager thousands I can save from toddlerhood to freshman year earmarked for tuition, I've resigned myself to just putting whatever's left of on the credit card.  I suspect my current investments will get me to millionaire level by then, and I'll be on the tail end of my career where I have enough to retire, but will keep working for the luxuries.

My parents paid for my college with little fuss.  It should not be a big burden for me to do the same.  I can see any other kids I might have pushing my retirement another four years in the future to cover their costs as well.

I'm pretty sure student loans are a scam anyways, but I only have a vague understanding of them.

[JSMustachian]

Our first one is on the way. We don't plan on doing any college savings under we have a fully funded emergency fund and all the retirement accounts are maxed every year. Once those are accomplished anything leftover can go to a 529.

Even with the 529 plan, I do not plan on paying 100% of college. Most likely 50% so there is some skin in the game.

[Zamboni]

I would recommend that everyone who is thinking about their child paying for all or half of their own college actually do research to see what it costs to go to each of the two biggest public universities in your state.

The cost of attendance in my state? >$25K per year for tuition/fees/room/board/books.

So, >$100K for four years for one student if they go starting this year. . . and they do raise tuition every year (almost every year the rate hike has been higher than inflation.) It is just good to have the number available.

Also, if the plan is to have your child's community college classes transfer to the local 4 year, look very carefully into which specific classes will definitely transfer for credit and which will not. . . it is very unsafe to assume that they will all transfer. Most schools will only transfer courses that they consider to be equivalent to something they offer on their own campus, and some limit the total number of courses that can transfer.

[Abe]

Our plan is to fully fund the college expenses if the kids seem like the will finish college with degree/career plan we deem practical. If they want to do something else, it's up to them to get the funding. Yeah I know it's paternalistic but we're the parents!

[kanga1622]

@newgirl, my wife and I would love to put away more for our kiddos' education, but as others started, we feel it's a good start to make sure they won't have to take care of us when we're older. Right now, my mom is in bad shape (financially and healthwise), and she'll likely be a drain on us for the rest of her life. My MIL might be going down a similar path.

My point is that this is a huge....I won't say burden, but it's a huge curveball as we try to get our financial house in order. So I want to make sure my wife are not burdens on our kiddos in 20 years.

Second, we're more than willing to do things like let them stay at home (probably rent free), provide home-cooked meals, provide guidance and advice, and perhaps even float them a small monthly allowance to help with incidentals. But we won't be able to pay for their tuition. I told my oldest last night at dinner, "Your job is to get scholarships. That's your job for the next 5 years." I don't really care if she works during high school; I'd rather her spend all her waking hours studying, prepping for tests, applying for scholarships, and volunteering.

This isn't a bad plan. My parents didn't have a very high income, raised 5 kids, and had no health insurance. I paid for all my college costs through scholarships, loans, savings, and working while they covered all car related expenses. My parents had bought my car for cash but I had a gas credit card where I never saw the bill and my parents paid for repairs and insurance. This made my monthly expenses less and allowed me to focus on saving up to cover tuition and books.

We live in a college town so my kids are absolutely welcome to live at home while going to school to save on costs. We also live within commuting distance of tech schools if that is the route they want to take. If they choose to go to another school that isn't local, we will cross that bridge at that time.

[I'm a red panda]

Our plan is to fully fund the college expenses if the kids seem like the will finish college with degree/career plan we deem practical. If they want to do something else, it's up to them to get the funding. Yeah I know it's paternalistic but we're the parents!

My parents had this plan.  I'm glad they changed their mind after I decided there was no way I was staying in engineering and moving over to education (something I had wanted to do since I was in kindergarten).  I was miserable in the college major my mother picked for me- I hated almost every day of it. 

I don't quite make six figures now (in a relatively LCOL area), but I'm close. My education degree has severed me well, and I'm happy in my career. I love what I do 95% of the days.

I think I'd rather have taken on debt then have my parents control my life as an adult; I'm glad they decided their plan didn't make sense. Most of my tuition was scholarshipped, but they did pay my rent. Of course it was always in exchange for being cared for in their old age. I guess if they dropped my college funding I could just drop their old age care and send them to a home.

Or maybe you have a broad definition of practical, and I'm judging you harshly on my own experience.

[charis]

Our plan is to fully fund the college expenses if the kids seem like the will finish college with degree/career plan we deem practical. If they want to do something else, it's up to them to get the funding. Yeah I know it's paternalistic but we're the parents!

My parents had this plan.  I'm glad they changed their mind after I decided there was no way I was staying in engineering and moving over to education (something I had wanted to do since I was in kindergarten).  I was miserable in the college major my mother picked for me- I hated almost every day of it. 

I don't quite make six figures now (in a relatively LCOL area), but I'm close. My education degree has severed me well, and I'm happy in my career. I love what I do 95% of the days.

I think I'd rather have taken on debt then have my parents control my life as an adult; I'm glad they decided their plan didn't make sense. Most of my tuition was scholarshipped, but they did pay my rent. Of course it was always in exchange for being cared for in their old age. I guess if they dropped my college funding I could just drop their old age care and send them to a home.

Or maybe you have a broad definition of practical, and I'm judging you harshly on my own experience.

I think you are really stretching here.  There is nothing impractical about a career in education.

[I'm a red panda]

Our plan is to fully fund the college expenses if the kids seem like the will finish college with degree/career plan we deem practical. If they want to do something else, it's up to them to get the funding. Yeah I know it's paternalistic but we're the parents!

My parents had this plan.  I'm glad they changed their mind after I decided there was no way I was staying in engineering and moving over to education (something I had wanted to do since I was in kindergarten).  I was miserable in the college major my mother picked for me- I hated almost every day of it. 

I don't quite make six figures now (in a relatively LCOL area), but I'm close. My education degree has severed me well, and I'm happy in my career. I love what I do 95% of the days.

I think I'd rather have taken on debt then have my parents control my life as an adult; I'm glad they decided their plan didn't make sense. Most of my tuition was scholarshipped, but they did pay my rent. Of course it was always in exchange for being cared for in their old age. I guess if they dropped my college funding I could just drop their old age care and send them to a home.

Or maybe you have a broad definition of practical, and I'm judging you harshly on my own experience.

I think you are really stretching here.  There is nothing impractical about a career in education.

My parents were STRONGLY against it, because there was no money in it (thus "impractical").  The first year salary was in the $22-30k range. My friends who finished engineering started around $80-90.

[mm1970]

Our plan is to fully fund the college expenses if the kids seem like the will finish college with degree/career plan we deem practical. If they want to do something else, it's up to them to get the funding. Yeah I know it's paternalistic but we're the parents!

I had a classmate whose parents did that.

He graduated 6th in our class with a degree in chemical engineering, a top-10 engineering school.

He earned a "free 5th year" at the school to study anything he wanted, only school rule was NOT your undergrad major.

He studied performance (theater, music, poetry).  Moved to NYC after and started working in theater.  Still is.  Probably not practical.  I never figured out if his parents were happy paying $120k (in late 1980s dollars) for an unused degree, but whatever.