Saving for college

takmjs · August 2014

How much do you save (or do you plan to save) for your children's college funds?

I have a 2.5 year old and another baby on the way. We've put $5,000 in my daughter's 529 fund each year so far, but I'm very hesitant to put too much in--because of scholarships, what if she doesn't go to college (I know it can be transferred), etc. I just don't want to waste our savings. I was thinking of putting $200/month into the new baby's 529 plan for at least the first two years, which would be close to the $10k we've put in for my daughter so far. Do we just stop there, and then let interest do its thing? I just hate to put too much money into their college funds. Is there somewhere else I could put it that we could still get tax benefits for her education?

I know we should fund retirement first, and we are. I've got a pension at work (5.5% matched). My husband and I max out our Roth IRAs each year. I also put about a good portion of my income into a 403(b).

Please share your experiences with college savings and any advice you have for me. TIA !

CuriousKiddosMama · August 2014

We put 250away a month and will probably do so for a couple years. We have a fund where you buy credits at the current years rates which isn't the most popular way to do things, but I really liked the idea. In 3-4 years we should have saved 2 years which is our goal. We want to pay half for each kid for sure.

lifeonthehill · August 2014

We would love to help but it just isn't in the cards right now. We don't want to put off TTC any longer. We will do our best to help as we can but it isn't something we are killing ourselves over.

We will be able to give our children a $200,000 private school education for high school which has helped other faculty kids to get great scholarships and go to public colleges in state without sacrificing much to student loans.

vlagrl29 · August 2014

Our kids will pay for their own college just like we did. We would rather retire one day than save for their college. We do however have a small savings for DD. when we get extra money we put it in there but it's not a set amount every month.

blondie42107 · August 2014

vlagrl29 said:
Our kids will pay for their own college just like we did. We would rather retire one day than save for their college. We do however have a small savings for DD. when we get extra money we put it in there but it's not a set amount every month.

Same here. However things might change.

cbee817 · August 2014

We set up 2 529 plans this year- each have $5,000 in there. We get a state tax break up to $10,000 per family per year. We'll put in another $5,000 next year for each as well. The plan is to be able to cover 4 years at a state school with both girls staying home. Vanguard has a really cool calculator for this- you can even enter a specific school for an estimate on costs.

http://www.archimedes.com/vanguard/csp.phtml

We expect them to go to college- both DH and I have BA and MA degrees/good jobs, so the expectations to do well in school and be able to support themselves is part of raising our girls. If they get a full ride or a partial scholarship, they can use the $ for grad school. We're hoping to have about $85,000 for DD#1 and $92,000 for DD#2.

I understand some people's concerns about not being able to retire (that's not really a concern for us- DH has a state pension and 403B, I have a small private company pension and a 401K, we both have Roth IRAs), but both DH and I were out of the house at 21 and never went back home- I just want them to start their adult lives on the right track like we did.

smbenevides1989 · August 2014

vlagrl29 said:

Our kids will pay for their own college just like we did. We would rather retire one day than save for their college. We do however have a small savings for DD. when we get extra money we put it in there but it's not a set amount every month.

This is what we do, too. I set aside $10/week from the week of their births until they turn 18. This will then go to school, weddings, first car, etc.

FabulousMrs.P · August 2014

We put $200 per month aside for college into a savings account. Once we have a good amount, we will probably put it into a CD. I am reluctant to put things into a 529 because I worry about what if she doesn't want to go to college. She will more than likely be an only child and I don't want to have to pay major penalities to take that money out for non-educational purposes.

brij2006 · August 2014

We're on the Dave Ramsey Total Money Makeover plan, and our child will be 1 to 1 1/2 before we get to baby steps 4 & 5. So our plan is that we will put $150/month into their 529 plan from then until it graduates from college. We figure that interest will keep up with the inflation in college tuition, but we will still need to contribute to it just like we would retirement.

hoffse · August 2014

We are in the "save as much as you can" camp. You need to look at the 529 rules. There are rules that cover things like scholarships, etc. There's a lot of misinformation about 529's floating around on the internet like "If my kid gets a scholarship we've basically lost that money." Not true. Read the rules from a reputable website like Vanguard or Fidelity and see if a 529 will work for your family and your family's expectations for college/education.

Our general idea is to use a 529 to fund college, and if they don't need it all for college then as a way to help for grad school. If they still don't use all of it, then we'll use it as an estate planning tool or use it to help grandchildren. We are very unlikely to ever use it for ourselves, and if we do then we probably have bigger problems than the 10% penalty. You need to talk to a tax person if you start using them as a way to move money from person to person, but there are some pretty clever things you can do with them. You just have to make sure you don't accidentally trigger something like the gift tax when you do it.

Our plan is to contribute at minimum $500/month from birth, plus as much as we can save beforehand as seed money. We have every expectation that they will go to both college and grad school. Of course we could be wrong, but both of us did that, all 4 of our parents did that, and all of our siblings have done that. It's what we expect our children to do as well. So given that you have to start saving based on nothing more than expectations, those are the expectations we'll be working with until we know otherwise. 18 years isn't very long to save, and it makes sense financially to front-load your savings as much as possible to get the full benefit of time/growth. We might even open a 529 in one of our names right after we get pregnant, and then transfer it to our child after birth. That would build in another 9 months of growth.

My last piece of advice is to look at what college actually costs. In-state tuition at Alabama - which is the "bargain" university for where we live - is about $10,000 per year now. Your living expenses, meal plans, housing, books, etc. are on top of that. The total estimated cost of attendance is now around $25,000 per year. Costs will almost certainly go up.

All that said, you do need to fund retirement first. At the end of the day there are options for students to finance their education that retirees simply do not have.

Kellyt2012 · August 2014

We are really focusing on retirement, too. We are saving 15% gross income now for retirement and will have the house paid off by college (kids are 3 and 1), so that's why we are not focusing on college too much because we will have a lot of savings and no mortgage.

jlaOK · August 2014

DS and DD each have a 529 plan. My parents give them money for it on Christmas and birthdays. We will start contributing when we are in our house (we follow the Dave Ramsey plan). We hope to be able to have their college paid for or be able to cash flow the difference. My parents paid for my college and DH took out loans. Our financial adviser predicts that that an in state 4 year degree will be +$100k when DS and DD are 18. I can't imagine having to pay back those loans especially when DH and I can afford a few hundred a month to be put in a 529 account.

To answer your question, I would use an online calculator to figure how much you need to put away each month/year in addition to what you already have. For us it's about $600/month (for 2 kids).

Saving for college

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