After ignoring the whole "how are we going to pay for college" problem for years, we recently started ufund accounts for our kids.
It's safe to say we have no idea what we're doing. We're trying to add $10K each per year, which is an amount I totally just made up. And probably won't be enough, since I expect college will cost one million dollars per year by the time they're ready to attend.
How are you saving for college?
I started a college account for each child before they were born. I deposit money in it monthly. It probably won't be enough either, but I hope it will at least help.
ReplyDeleteI use 529 plans. You can use them for higher education anywhere (in any state) and even change the beneficiaries if things change (e.g., kid drops out of school, etc.). To get the best rates (fees, etc.), shop different states. (Consumer Reports had a good article on this some years ago.)
ReplyDelete-Judy
That's where I got stuck. There were SO MANY options and I really couldn't choose a 529 plan. So I just opened a bank account and plan to look into it "later". I really just want someone to tell me what the top 5 options are (or even just tell me what to choose).
DeleteAna, you really want to do something like a 529 plan rather than a bank account because of the tax ramifications. It grows tax free and, as long as it is used for higher education expenses, remains tax free. Just pick a provider. Most providers typically have funds that are adjusted for age and redistrubute stock/bond ratios according to the year you need it, like some 401(k)s do (e.g., a 2030 fund if your kid is a baby and you need the $ in 18 years or a 2020 fund if your kid is 10 and you need the $ in 8 years)
DeleteJudy
Started 529s but only contribute sporadically. We were told our daycare costs more than college does so I'm hoping we'll be able to pay partially OOP when they're in college to make up for the inevitable shortfall. Also the reason we're stopping at 2.
ReplyDeleteNo college savings - couldn't do it, and figured giving them rich childhood experiences was as important. Both are now done college...we had monthly tuition plans, parent loans & they both had student loans. You should save if you can, but it is likely to be a drop in the bucket (& makes the investment bankers happy & rich). There are ways to help your kid make college happen even if you did not save though!
ReplyDeleteMy parents were never financially apply to contribute any money to my college costs. That didn't hold me back at all from college or medical school, even though I have significant student loans. Now that I am finally finishing training, I'm hoping to start a college fund for my children. Right now, though, we are weighing the benefits of saving money for their education or to focus on paying off mine.
ReplyDeleteI have 3 year old twins and our financial advisor calculated that we would have to put away something like $1400-1800 per month from now until they are 18 if we wanted to be able to pay for both to go to private colleges. Unbelievable. Hopefully the whole concept/expense of college will change by the time they get there. We are instead putting $500 per month in a 529 and some into other savings that are less %100 committed to college funds.
ReplyDelete@Katherine--take care of your loans before worrying about your children! Look at what the interest rate is on your loans and you'll see it makes financial sense! Signed, the Dave Ramsey wannabe!
ReplyDeleteYes! That was exactly what I was thinking, "What would Dave do?" I found a brilliant investment professional in my area and he walked me through everything.
DeleteUpromise has a 529 that in addition to your contributions, can receive contributions from locations where you spend money. My husband and I registered our debit cards (safely). Now his business lunches add andywhere from 1.65 to $25 to the account.
ReplyDeleteThere are no state limitations. Disbursments are easy and so is changing the beneficiary.
Starting a 529 is one of those things I was planning to do before starting residency. I'm hoping I can get the grandparents to contribute to it rather than spending tons of money on clothes my kid will never wear.
ReplyDeleteGood luck with that. My parents would rather contribute to the great mound of clothing than the college accounts.
DeleteLet your kids pay for their own college. More kids need to think of college as an investment they make to optimize the productivity of their working lives rather than an extension of childhood provided by their parents. I am in my first year of residency, my parents helped a little with food and let me live in their house at times, but I paid all my own tuition and owe about $60K. Parents who think they are obligated to pay for college are half of the reason college costs so much.
ReplyDeleteVote for lawmakers who will invest in your state university system(s). States have been disinvesting from public education for a long while (since the 80s), and we, the voters, have voted for them again and again.
ReplyDeleteI have two kids in college right now. One thing I'd suggest is encourage them to get good grades. (duh I know).... But seriously both got scholarships which really negated what we had to pay. The oldest also got a summer job and paid her tuition. We have really tried to help them because we don't want them immediately saddled with student loan debt. It's a different world now then when we graduated with all that debt. If you have kids near college age have them apply for every scholarship they can. Even the little ones add up. We didn't do a lot of pre saving and so far with the scholarships we haven't had to take out any loans.
ReplyDeleteDo scholarships even exist any more? I received a 5,000 dollar scholarship and I am very grateful but there wasn't a lot available. Maybe 3-4.
DeleteState 529 accounts. Get an extra tax break.
ReplyDelete