How are you saving for your kids education, if at all

Parents Forum
21

<p>We've been fortunate and hard-working. We've saved every year in 529 plans plus gifts from grandmother for both kids. I think tuition for both kids is now covered. I've also had one kid in private school in each year for the last eight years -- the first one spent grades 4-8 in private and is now in public; the second spent 6-8 in private school and is now entering a private high school (freshman tuition $32K). With luck, I may be able to pay for a significant part out college out of current income and use the 529's for graduate school if it is needed, but I won't count on that. When the older one is in college, we'll effectively be paying two tuitions (private HS and college or two colleges). When he graduates, we can take whatever we would have been paying for private HS to pay for the younger one's college.</p>

<p>Plus, my kids are dual US/Canadian citizens. For Canadian citizens, McGill is very cheap and will clearly be on the list of schools, all our bright Canadian nieces and nephews go there and love it, and our kids know the area because we share a house in the country outside of Montreal. Probably not a good fit for the older one, but our younger child decided to study French rather than Spanish because at the time she was planning to go to McGill (although all classes are in English, life in Montreal is easier if you speak French). I'm not counting on that tuition-saving when push comes to shove.</p>

22

<br>


<br>

<p>This plan has worked for us also. It incorporates 2 items that are a must if you want to accumulate a nice-sized college fund--start early to save & invest that money (make it grow much faster). </p>

<p>Our plan was for us to save, invest the money, use our home equity, take out PLUS loans and for me to go to work after the youngest left for college. </p>

<p>We started when the oldest was 5 and the baby was just a baby. They are now 21 and 16 respectively. With a little bit of continued luck, we won't have to take out any loans for the kids' education and I won't HAVE to give up tennis in the mornings!</p>

23

<p>
[quote]
you may want to re-think the UGMA Oregonian--it counts heavily against you in the financial need formula.

[/quote]

Yes, I've heard that... unfortunately I found out too late in the game. We don't have all that much in the UGMA (~10K per child). I considered cashing out of it, but then we'd have to pay taxes on the amount it has earned. According to the financial aid calculators, our EFC is going to be too high whether we have the UGMA or not, so in the end, it won't really matter.</p>

<p>I'm actually hoping to not touch the UGMAs and just give it to them after they graduate from college.</p>

24

<p>^^That may be so about Oregon's need based aid for instate schools, assuming that is your target. We were targeting $120,000+ in 1985 for first year 2003. Son jumped the target date and actually started in a 2002, a very bad year. </p>

<p>We did almost exclusively UGMA/UTMA because that was the only tax advantage program then. We did EE's, stocks, MFs, Educational IRA, and eventually 529, and luckily, once in lifetime, ridiculously low interest student loans. Son' s college fund is now way overfunded and is now his money. With initial gifts and bday presents, and $166/mn for years we did it and would have done it sooner if I hadn't stopped contributions in 1987, and again in 1990. I am trying to get the accounts into his Roth IRA and other investments, including restarting his 529 for my future grandkids, which I don't expect for another 10 years or until a sharp girl improves her bait & hook. I figure 25+ years will be about the time when a future grandchild will hit college and we will have paid off the last of his PLUS loan. I figure $20,000-$30,000 contributions over the next 10 years should just about get a grandchild into any college, or 2 grandchildren into a pretty good LAC college, or 8 grandchildren in any instate institution. Virile son and fertile wife- we hope. </p>

<p>As Ben said, "a little bit over time, saves effort and money."</p>

25

<p>
[quote]
I won't HAVE to give up tennis in the mornings!

[/quote]

That's one reason I'm only working part-time! I love tennis!</p>

26

<br>


<br>

<p>The only reason, really, is that having the college money in hand will give your daughter more options when it comes time to pick college. </p>

<p>There is no problem with deciding as a family to constrict college choices to those schools which you can pay for out of cash flow and scholarships & grant aid. Just so everyone is on board with that decision. </p>

<p>I went to a cheap college and lived at home while going to college. I don't feel deprived. But we saved and invested over the past 16 years so that if our kids want to go to a hideously expensive out of state private school, we would be able to afford to send them.</p>

27

<p>Re spending down the UGMA account:</p>

<p>One of our friends had an UGMA for their child and needed to spend down the $$ before the college financial aid snapshot needed to be taken.</p>

<p>The daughter used the money to buy a new, much higher quality musical instrument (she played the bassoon and planned to be a bassoon performance major at college)--That instrument was hideously expensive but also a work of art!</p>

<p>Maybe there is something like that that the $$ can be spent on?</p>

28

<p>Didn't save early on due to H's education/debts, then made saving for our retirement a priority. We live modestly, and are paying from current income. S worked during high school and summers, so he pays what he can.</p>

29

<p>DH had student loans until the kids were six and seven years old. I was home for three years (back-to-back babies) and then had child care expenses for four years. We did the $100/mo. to an UGMA, but that fund didn't do well, and today it is not a lot of $$. We decided to abandon the UGMAs and started simply throwing money into our mutual funds as often as possible. I left work three years ago due to health problems and that has affected our ability to save, though we have not had to dip into what resources we have, thankfully.</p>

<p>Since DH didn't have a pension plan until 1998, we have been making up contribs to that ever since. We are big fans of the save-it-before-it's-in-your-paycheck method. We both grew up in families that were a paycheck away from the edge. No help or legacies from the grandparents. We are both pretty thrifty.</p>

<p>The biggest source of money for college will be our home equity -- we had really good timing when we bought the house, refinanced to a 15 year mortgage a few years ago, and have built up good equity which we have not touched. Our equity has grown faster than we could save.</p>

30

<p>When we paid off our own college and grad school loans, we continued to "pay" the same amount.... but to the kids college funds. Sort of a pay it forward concept. The miracle of compounding should be taught to every HS senior. We also refinanced the house to take advantage of significantly lower rates and again, just took the cash it generated every month and stuck it in the college plans. I've got neighbors who took the bounty from refinancing and bought nice cars and took cruises; or took out a chunk of equity when prices started to zoom and put in a fancy kitchen and great room-- they've got a nicer standard of living than I do, but I'll take my Honda junker and the kids college tuition any day.</p>

31

<p>^Similar for us. We lived below our means, even when we had very little means, and when we finally got grad school paid off, and the income went up, we lived as if we didn't. Saved money in a standard savings account (I'm beyond risk averse.) But because we were living so far below our income, we paid out of pocket and saved each year, too. Last year we put some of the savings into paying off the mortgage (yay!).</p>

<p>Now that our income is down, way down, we're getting FA from S's school-- grants, loan, and workstudy. It's nice that he's at a school that will adjust to a change in income like that. I'd heard here at CC not to expect that to happen if you hadn't applied for aid as a freshman, but the FA office were puzzled that I wondered. They said of course to apply, and it's made a huge difference for us.</p>

32

<p>We created a college fund the month my S was born. We began by investing zero-coupon bonds laddered to mature each year he would be in college. Once we got the basics covered we started investing in more risky (but higher return) stocks. We are a two income family and have always lived on one income and saved the rest. Any gifts from grandparents went into the fund. Same old house, same 15 year old cars, lots of fun camping trips and looking forward to a no-debt college experience.</p>

33

<p>We were married for a number of years before having children, and we saved, saved, saved. Stocks, savings accounts, savings bonds, 529's. We have lived well within our means (most would say well below our means) and now have the opportunity to give our 3 kids a college education at the "best" schools to which they are accepted. We used to take driving vacations with the kids to modest places and only recently as they have become teenagers and our income has increased have we started to take "flying" vacations. But, we still do not go overboard with vacations. We have 3 cars (we soon will have 5 drivers!), one relatively new one with 12,000 miles on the odometer, and two old cars, one with 93,000 miles and the other with 193,000 miles. We could afford much nicer cars, but the $$ is going for education, truly our first priority.</p>

34

<p>OP, did you buy property in Kelowna, BC?</p>

35

<p>garland, that is good to hear. Calendar year 2007 is going to look pretty good due to severance pay and January bonus. However, calendar year 2008 is a big unknown and could be drastically lower. We may apply for financial aid just to see what the school's response is, but fortunately we already have enough in 529 plans and investments in kids' names to cover 4 years (including merit aid).</p>

36

<p>Despite lifestyle choices to minimize expenses, when elder S started at a private LAC 4 years ago we had saved enough for just one year. GULP.. .
Having no debt except for a small mortgage saved us. We pay tuition from current income. Eldest graduated last month with 3k in debt. S#2 is a rising college sophomore at a private LAC and although it is tough to come up with our EFC of 40 K on an AGI of 105K we know we are fortunate to have the income to make this work.</p>

37

<p>We put a huge chunk of change into tax-free bonds when the kids were toddlers (instead of buying a more expensive house). Turns out that one of them isn't going to college (except maybe community college or trade school) so we will be getting some money back.</p>

38

<p>Dumped as much cash as we could into a 529 plan early, so that we could let it build on its own.</p>

<p>Our other "strategy" isn't really a strategy, but it bears mentioning....we happen to be sending Hoedown Jr. to a private elementary school and plan to continue. That means we are already used to seeing tuition $$ fly out of the budget. When it comes time for college costs, we'll be long-practiced in living poor, driving Honda junkers (us too!), and writing big checks to educational institutions. Same old, same old.</p>

39

<p>Save? Hardly at all. And given the time value of money, it wouldn't have done much good, given how much we could have saved. Money was <em>much</em> tighter when we were younger than it is now. We deferred a new car for a couple of years--needed because of my business--and cut back on some expenses. But it's been a combination of writing checks and taking loans in our name. The total on the four years of loans is the equivalent of a car payment on a very nice SUV but we don't have/need/want an SUV and we figure that we'd rather pay for D's college more than about anything else in the world besides our home. We're just glad that we're able to do it.</p>

<p>In a curious way, we're better off handling college expenses by living in a high-cost, high-income area than we would have been if we lived in a moderate- or low-cost, moderate- or low-income area. The expenses inflict pain but are doable when viewed against income and other expenses.</p>

40

<p>H and I also bought rental properties with the intent of selling them to fund the kids college education. Fortunately over the last 20 years this avenue has worked for us. Interestingly we projected about $20,000 per year for college educations which back in the late 80s was the projection for tuition, room and board at our state U and it played out that way. We used that as our benchmark for the amount we would contribute to each kid. It was a compromise between my H (a state school grad who paid his own way) and myself (an expensive LAC grad whose parents paid everything). In addition to the rentals we had the kids grandparents buy them bonds in lieu of birthday and Christmas presents (they never missed presents) and we also put a tiny/small amount away each month from our salaries for each of the kids. Our biggest concern was that we married late and had kids late so my H is now retired and when we executed the plan back in the 80s we did not want to be in a position where we had to either dip into retirement or create a new mortgage or huge loan this late in life to fund college. That strategy can be good or bad depending on how you look at it because our EFC was of course just about equal to the amount we had saved for the kids so no handouts for us. We are also slightly risk adverse to having big debt during retirement which doesn't bother some people, but would "bother" us. But interestingly given our current reduced monthly income (because H is retired) and despite our retirement assets our EFC was within a couple thousand dollars of what I expected and hoped - and what we had projected for out of pocket costs. It would be nice to have "free college" but that's not really a reasonable screnario for the majority of families so it's also good not to have your head in the sand without a plan is what I tell "younger friends" who ask what H and my plan was/is. There are better plans than H's and my plan, but it worked for our particular situation in life at the time.</p>