<p>Threads like these have gotten me thinking about saving for future children’s college education. H and I are planning on starting a family within 3-5 years, and I know some people start saving for kid’s college from the day they are born, or at least when they start kindergarten. </p>
<p>My dilemma I face is that I work at an expensive private school, and I anticipate turning my straight out of college job here into my career. Providing the university keeps their tuition remission benefits for dependents - all of my children can attend here with 90% of their tuition covered. However, how much should one plan to save for school? While I would hope and pray that all kids attend school where mom works and dad is an alum - there is no guarantee that they won’t want to move across the country for school. I’m probably a little premature in trying to plan for all of this, but I know that those years fly by. </p>
<p>Awesome- there’s an easy solution to your dilemma. Quit your job and get that coveted income of zero. You will find that having a college savings account doesn’t pay for the COBRA to replace your health insurance; doesn’t make payments into your life insurance policy; doesn’t contribute to your 401K or any other employee benefits you are getting right now. You’ll be spending down that college savings plan in no time just to keep that roof over your head and voila- financial aid for your kid.</p>
<p>I appreciate that you aren’t begrudging a poor kid from getting an education, but I feel sorry for parents whose kids are coming up on college and they don’t have savings. The likelihood of them hitting the admissions lottery and getting into a school like Princeton or Harvard- both need blind, and with a reputation of coming up with exactly what their financial aid calculators say they will give you- is extremely small. So most of the “no savings” folks I know end up really regretting the toys and the stuff and the vacations. Yeah- Disney is fun. But watching your academically talented/serious kid wait for the bus in the morning to head off to community college or the local non-flagship state college when you all had much more ambitious aspirations- well, makes you rethink the years of spending all your income.</p>
<p>Having savings gives you choices. You can apply to a bunch of merit schools, knowing that in a pinch, you can stretch if the big award doesn’t come through at the most preferred school. You can apply to both Need Only and merit schools, confident that your kid will go to college- you just don’t know where. You can look at the EFC calculators and even if they make you gulp- “U Chicago expects us to pay THAT for four years?” you have the option of stretching if you choose by paying down your savings- or not.</p>
<p>The no savings crowd doesn’t have choices. Their kids will go to the school which accepts them where they manage to pay out of current income plus financial aid. If the kid is a superstar- then yes, there will be choices. But just a strong, academically oriented kid who doesn’t want to become a Phys Ed teacher at your local state college so he/she can live at home and save on dorm costs? Not so many choices.</p>
<p>Assets are very easy to give away. If you really feel that the no asset crowd is better off than you when jobs are lost, then it’s very simple to donate your assets and be on equal footing with those with no assets. Since FAFSA and PROFILE assets are reported the day you fill out the forms, you can that and have a zero asset balance. BUt you might as well pay the school while you do that. </p>
<p>It’s the options you have when you have savings. Yes, a family who did not save could hit the jackpot with kids who are intrepid and top scholars and get the full rides, get into the colleges that will give full financial aid, but they could also end up with kids who are with classmates who can afford certain schools and their parents cannot, and it’s an issue. </p>
<p>I’ve mentioned this several times how my one son got a full tuition award from a local school. Well, so did a lot of kids we know. A lot of them took up the school on that offer, kids from households that are very well to do, what I would have thought were more upscale than ours. And those kids had the test scores and grades to get into much more select schools. THis deal is for a small local college that doesn’t show up on the CC forum but once in a blue moon. My son was a bit surprised at who ended up doing this route. It allows the parents to continue their upscale life style and the kids too. They have their cars, enjoy NYC, and live a much less frugal life than my son who works some hours, lives off campus in cheap run down digs, no car and makes his meals at home as much as possible. He has some things he likes to do, so has to watch his money. He picked a school that was more than we could pay, so he makes up the difference which means not a lot of money to spare from us and for him. He’ll be on a bus for Thanksgiving coming home instead of a plane, same for Christmas, and though I wouldn’t say he’s strapped, he does have to watch his money. It cuts into our life style too having to pay really more than what’s comfortable for us, and avoiding the loans. </p>
<p>Of course one month or even one year of cell phone and cable bills won’t put much of a dent in private college tuition. My family spends about $300/month for our cell plan and pay TV. If that money was invested instead at 6% (not an unreasonable historical return for equities) over 18 years (you’ve got to start when they’re young) in a tax-free vehicle (can anyone say 529?), it would be worth well more than $100,000 when little Sammy or Susie is ready for college. That’s the miracle of a compounding investment over time. And it takes discipline.</p>
<p>At the type of schools which meet full need, the actual per student cost is discounted for everyone from the endowment. You pay 60k but the actual cost is 90k. You are not paying for poor kids to go unless you are also contributing to the endowment in some other fashion. There are few schools which meet need with no or capped loans, thus “free” college educations are quite rare.</p>
<p>@ kgos16
Some of our friends were in the same situation as you. The father worked at a private college for decades thinking that his children would gain tuition remission at his workplace. When the time came, both children were rejected as the college decided that their grades did not qualify them for acceptance. Ultimately these kids had to go the community college and lower rank state university route. Don’t count your chickens before they are hatched.</p>
<p>@electronblue - I’m not sure that I buy the idea that the actual cost is 90K. For what? Every school on my kid’s list except the state school safeties has a sticker price of 60K +/- 5%. I just don’t don’t think they all cost 90K. I do feel that a lot of the schools keep the prices high knowing that they’ll be able to get a certain percentage of full pay students which will allow them to keep prices lower for those who can’t pay. @cptofthehouse and @blossom - I think you looked hard to find something to disagree with in my most. I never said that the no savings people would be better off than me. And I said that while it “kind of bugs me” that they would get a substantial aid while I would have to spend the money I saved, I believed it was the best way - direct from my post:</p>
<p>“However, there really is no completely fair way to do this, and I’d rather err on the side of educating as many children as possible, even if it means that I am slightly “punished” for making frugal choices.” </p>
<p>@kgos16 - I recommend saving as if you didn’t have this benefit to rely on. As @albiongirl said, it is very possible dependent children may not get in to the school where their parent works. Or something might happen and your job could be eliminated. You could get a much better offer to work outside of academia. Your child could want to major in something not offered at your school. Or, as a financial planner pointed out to us, you could die or become disabled before your child enters college (difficult to think about, but it is one scenario).</p>
<p>We’re fortunate that H works at a university that participates in Tuition Exchange - our kids are eligible for significant tuition remission at a number of schools through this program. But we’ve always known the school could do away with this benefit at any time, or could change the rules and impact our eligibility. So we’ve put aside money. Look at it this way - if your kids DO attend the school where you work, you can easily pay for them to live on campus, you have funds for them if they choose to go to graduate school, and if they don’t, then you can give them a nice hefty down payment for a house someday.</p>
<p>I don’t believe cell phones were as prevalent 18 years ago. The service was also less expensive. Cable was probably less expensive too. Also, for many people their cell phone is their only phone, so you can deduct that house phone bill from your figures as well. In many areas some form of Cable TV or subscription TV is necessary for any reception at all. No roof antennas allowed. I don’t think taking your current 300/mo bill is a fair number to use for the past 18 years of investment. </p>
<p>I agree every kid in the house doesn’t need the latest smart phone, with the most expensive service and people don’t need every premium channel, but I don’t think it is reasonable to compare that level of service to a zero dollar option.</p>
<p>Yes, people would be wise to save, and not splurge on so many extras if they are trying to save money, but not everyone who is struggling is that way because they spent too much money on their cable/cell phone bill. </p>
<p>@purpletitan - I realize that private school tuition is more than fancy cell phone plans, etc. “Going to college” does not equate with going to private school in my mind. </p>
<p>The whole discussion of cell phone plans, etc. is more or less a discussion of prioritizing where one spends one’s money. The parent at my kid’s private high school who complained that she had to pay full price at the local U surprised the heck out of me … she paid thousands of dollars a year for K-12, with the high school costing just a couple thousand a year less than the U. The parent whose kid was in competitive dance was upset that her D didn’t get financial aid at a state U that I doubt cost much more over 4 years than she had spent on lessons, costumes, transportation, hotel rooms, and dining out while her D was competing. Choices, choices, choices.</p>
<p>In the end, financial aid is all about helping those who need it most. There are so many people who make so little money. Those who wasted their money over the years are, for the most part, not getting a bunch of financial aid. A faculty member with whom I work lamented to me that saving will hurt his kids when it comes to financial aid. I had a news flash for him … his kids would not qualify for financial aid at the VAST majority of schools in the U.S. (maybe not at any, now that I think about it) based on his/his wife’s income (even if they hadn’t saved). And the great news … IMHO … is that he saved and can pay. </p>
<p>Way back when I was a single thirty-something in NYC, I wanted to save money for a down payment. The first thing I did was to eliminate taxi rides home from work when I worked late. The subway took longer but it was $1.00 (then) vs $8-10 for a cab. It put me into a mindset for saving money.</p>
<p>Similarly there are little things–don’t eat out, no takeout food for dinner, don’t buy lunch, no cable, cheap cell phone plan, buy food from a list at the supermarket, paying attention to sales–that change the mindset for spending or saving.</p>
<p>I was referring to the sticker price you are charged as not being the actual cost. As one example, 90K is what Williams quotes as the actual cost of educating each student per year. That cost is supported by the endowment. Full pay students less so than full aid students, but the point I’m making is that full pays are not paying for their kid and the kid down the hall.</p>
<p>Why not? My main point, which you seem to have missed, is that many people spend money on things today that they consider necessities, when in fact with a bit of discipline they can do without, or at least cut back on. Cell phones? We didn’t have 'em when I was a teenager, and everyone survived. Pay TV? Not until I was in middle school, and then it was only 13 channels at most. And more importantly, relatively minor regular savings, if invested and left alone over the long haul, can accumulate to a relatively large number. But I think too many people look at the insane cost of a private college education and think there’s no way they can even begin to make a dent in that figure with personal savings, so they don’t even try. And they’re wrong. And they’re either too lazy or too stuck on their modern conveniences to make the sacrifice.</p>
<p>Middkid, those are your choices. I LIKE cable TV. It is my choice for entertainment for the most part. I like theater but can only go a few times a year, but I bet you wouldn’t look down on my choice if I spent $200 for ballet tickets or Broadway tickets. Rarely go to the movies (like once a year). Sending my kids to college is an important goal, but not the only goal in my life. I don’t want to live like it’s 1970 with no cell phones (we, in fact, don’t have a land line) and no cable (in fact, my home had cable in 1966 because otherwise there was no reception and more important to my father, no sports). My children participated in sports, not ultra travel level but more expensive than the local rec league, because they enjoyed it at the time. Both happen to be playing in college too (one on scholarship, one at the club level), but at the time I was paying for club teams and travel it was because they enjoyed it and got a lot out of it. Yes, I could have saved several thousand per year and they could have sat home watching the cable TV, but again, college isn’t the only goal in life. I’d hate to think that I’m sending my kids to college so that they can get jobs and immediately start saving every cent they make to send their own kids to college some day, not enjoying the money they are earning along the way.</p>
<p>I think all you need to realize is that you can’t spend the same dollar twice. If you buy vacations and cars and snowmobiles and dance lessons and braces with the dollars you earn in 2001, you won’t have that to pay for college in 2014. That’s a choice. It may be that that family decides not saving for college is how they want to live, or only saving $10,000 instead of $100,000.</p>
<p>What is unreasonable is to get to 2014 and expect someone else (financial aid) to pay for your child’s college because you spent all your money. And not only should someone else pay for college, but the best college. Any college the child wants. No.</p>
<p>I’m happy with my choices and so, I think, are my kids. They are both having a great time at the colleges they picked within our budget. Neither has received a cent of need based financial aid, and yet we had cable tv and music lessons and club sports.</p>
<p>^^^
I hope that you don’t feel the need to be defensive, because nothing I wrote was directed at you. If you made choices about where your money went and you’re not later complaining about not having saved enough to afford a particular school, it’s all good. I’m not saying that all (or any) parents should live like monks in order to have choices for their kids later.</p>
<p>hi there rtdsmith. i think i understand what you were saying. and i know all about the retirement money invested in an apartment instead of retirement money in a 401K. that affected us greatly, but the magnitude of the effect would be different if we had a different income.
to the person that was thinking about tuition benefit, check on the following…program is in contract and your hire date qualifies you to be “grandfathered” if the benefit changes in the future (that is the case for me). also check about disability…my tuition benefit actually even survives me…which is pretty amazing. finally, compare salaries based on the entire package… my pay is lower than comparable places because of this benefit. i have accepted this calculation, but my kid was also able to get in to this university. at a different school, it might have been a different calculation. </p>
<p>oh and yes, we did also save as much as possible for kid in addition to hoping/planning for benefit. it’s just tuition, remember…not fees, not room or board. the tax free daycare reimbursement savings plan is a great one. we couldn’t swing it, but we wanted to!</p>
<p>It sounded to me as if you were saying the 300/month your family pays for cell plan and pay TV if invested over 18 years, starting 18 years ago would have gotten you more than $100,000.00. If you are talking taking 300.00 today and investing it for 18 years from now, aside from not helping the current family, I think the 100k probably won’t be enough to cover 4 years of college 18 years from now either. </p>
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<p>I didn’t miss your concept which is why I said:</p>
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<p>I just think your example was misleading, at least the way I interpreted it. </p>
<p>How is it misleading? $300/month invested for 18 years at 6% will give you more than $100k, whether the 18 year investment period is just ending or just starting. If you’re saying that most folks didn’t have $300 in combined monthly cell phone and TV bills 18 years ago, I readily agree with you. Certainly wages were lower back then, but there were also likely fewer (or lower) monthly bills to pay. The disposable income to pay for cell phone bills with data plans and to pay for cable or satellite TV with ever expanding options (and higher annual costs) didn’t appear out of thin air.</p>
<p>I don’t know if I’d tell a young family to cut out smart phones and internet from the budget these days. In many situations it would be short sighted to do so. My cable, home phone and internet are all bundled at the moment and to cut on any of them doesn’t make sense though I could save money doing so. One has to live in the present as well as for the future. </p>