Child College Savings

[Allen]

OK.  Today I made my first contribution in savings towards my only childs college.  She is currently 7.

I'm currently putting $250/month (Starting today) into the Utah 529 plan.  I don't live in Utah, but my state only offers pre-paid tuition and Utah has among the lowest administrative feeds to buy low cost vanguard funds, and high contribution limits.

This probably isn't 'enough'.  I'm at a loss on how to decide how much is 'enough' to make sure she can get all four years of a state school (at least) paid for.  Tuition has been increasing far faster than inflation but it can't be sustainable.  Over-saving in the 529 would kind of suck for me since I don't have other family members it would make sense to have use it.

What is smartest in my case?  I'm thinking continuing with the $250 a month and then any additional savings putting into a normal taxable account.  (Already maxing 401k, Roth IRA and HSA).  My thinking is if she needs more she'll have it, but if she doesn't it can be part of my retirement account (or a gift to her later or whatever).

Second part of my question: How do I balance taking care of college for her (which I had done for me and want to pass down) with making sure I have saved enough for myself that I don't become a burden to her later in life (which is what has happened to me with my Mom). 

The most certain method to make sure neither of those happen is to work forever and amass FAR MORE than I need; but then I don't get to early retire.  Is there a good way to balance these concerns?

[mxt0133]

To help you answer the question of how much should you save, first you need to distinguish between sticker price and actual expenditures.  Lots of universities and colleges have financial aid packages that drastically reduce tuition costs.  So you need to pick a school and find out what the average financial packages are and see if you can qualify for those.  This will give you a better idea on how much to save.

Then you need to project the how much it is going to grow.  This is not the above inflation rate everyone is quoting, again this is sticker price vs actual price paid.
http://economix.blogs.nytimes.com/2013/08/22/college-costs-rising-yet-often-exaggerated/?_r=0  NOTE: this is for the average student, if you are high income then yes your are paying sticker price which does have a higher then inflation rate increase.

I would then visit your projects vs actual costs and adjust every few years, either increasing or decreasing contributions.

Regarding how to balance your retirement vs their education then I think being on this forum is one way to be the Baddest Mustachian you can be is a good start.  By being able to take care of you own financial well being you are more than likely to be able to help out your kids and not be a burden for them in the future.

Remember you can get a loan for college but you can't get a loan for retirement.

My personal strategy is to not rely on school to be the primary source of education for my children and to teach them as much as I can with school as a supplement.  I will be able to do that by either retiring early or working part-time as they are growing up.  An added benefit to being FIREd is that you can structure your income so that the can qualify for financial aid packages and might even get paid to go to college.  If not then I can work and help them pay for tuition if they really need it.  I think flexibility and options are important when planning for things that are so far out into the future.

[ZMonet]

Like you, my parents gave me the gift of education and my way of paying it back is to give it to my daughter.  I didn't get it when my parents didn't buy me toys, lots of clothes, a car later on, etc., etc. but now I realize their priorities were so squarely in the right place.  Having the freedom post grad school to select any job I want is the bets gift ever.

I'll give you the standard advice you probably already know and have heard tons of times.  When it comes to saving for your retirement versus kid's schooling you save for your retirement because you can always take out loans for school.  As they say, no loans for retirement.  That sucks that you were stuck financially caring for your mother and I can see why you wouldn't want that burden placed on your daughter.

As for the amount you are putting in, $250/month, starting at age 7, doesn't seem like it would put you in a situation where you will have too much in a 529.  Well, I take that back -- if you have a low income than maybe your daughter won't have too much of a bill.   I'm putting $800/month in my 4 year old daughter's 529 and I'm wondering if that will cover college for her.  And these days education is a continuing thing, whether it be grad school, changing careers or just wanting to further yourself.  If you do save too much, the 10% penalty isn't the worst thing in the world...and I saw some posts on here where people speculated on creative accounting for getting the money out w/o penalty (taking the minimum number classes at the local college and using the prevailing room/board as the amount to take out of your 529).

[mxt0133]

Here is a site that lists the average financial aid packages for colleges, for example Berkeley's in-state tuition is $13k but average need and non-need based aid is $4K, add tuition tax credits (not deductions) which is up to 2k a year and you looking at spending $7K vs the $13k sticker price.  Again if you are in the higher income brackets, then you are probably paying full price unless you get merit based scholarships.

I also want to add a comment about scholarships, there are so many available scholarships out there that if you plan early enough you can easily get $3k-$5k in scholarships just by applying.  You just have to know where and how to apply.

https://bigfuture.collegeboard.org/college-university-search/university-of-california-berkeley

[TerriM]

Second part of my question: How do I balance taking care of college for her (which I had done for me and want to pass down) with making sure I have saved enough for myself that I don't become a burden to her later in life (which is what has happened to me with my Mom). 

The most certain method to make sure neither of those happen is to work forever and amass FAR MORE than I need; but then I don't get to early retire.  Is there a good way to balance these concerns?

First, I HIGHLY recommend having her take on some loans for her own education.  My parents paid my education while my mom emphasized how important education was by encouraging me to take classes over working during my high school summers.  I ended up staying in college way longer than I should've--perpetual student.  They paid for 5 years, TAships paid for 2, and the last semester I didn't want to ask them for more tuition so I took on a loan.  That was a kick in the butt.  I worked harder that semester than I did any other to make sure I finished everything and didn't have to pay even more by going week by week into the summer to finish my thesis.  Handouts are nice, I love 'em, but you don't truly appreciate what you don't work for yourself.  Make her work for it.  You can always pay off her tuition gradually *after* she graduates if she needs help.

Second, your retirement needs come before her college needs.  You need to look after YOUR needs first so that she doesn't have to, just as you're observing with your mom.