“about $50,000 a year…so $200,000” - well, it was tiny bit more as we counted the living expanses also. Our estimation was about $300k. But considering the fact that employers are contributing to 401K while you are not paying taxes on any of it until you withdraw, it accumulates much faster than regular savings. We were contributing heavily. Now it all makes sense. I used to think about this money as though I will never see them. And it may as well happens, so we continue to withdraw and spend on something more real than 401K even after we are done paying for D’s tuition. One thing to keep in mind, we are not high earners at all.
I think “how much will you have saved” needs to be taken in an absolute and a relative sense. We had put together plenty of real cash – more than enough – for each our our two if they were to attend public colleges or universities in our state.
Our goal, however, was that they be able to attend the college of their choice, unconstrained by resources and without needing to take on loans. Through a combination of savings, gifts from grandparents, and current income flow, we paid for both kids to study at private colleges and to graduate in 4 years debt free. (No debt for them, no debt for us.) I’m not sure that we could have managed this now if they attended the same colleges, after the continuing expansion of college costs of the last 15 years.
That said, I don’t think the kids’ subsequent lives and careers would have suffered if they had taken public options. At least one of them would likely have received serious merit aid if he had thought strategically about college selection with cost in mind. Also, many factors play into what kids get out of college or after college, and kids are enterprising enough, so that it’s not hard to imagine they’d be in a similar place now in their lives if they’d gone to different colleges.
Our goal was the same as @mackinaw’s: to do what my parents had done which was to enable us to get undergraduate degrees and maybe advanced degrees without debt if we could. The Jewish religion and culture place a very high value on scholarship. Moreover, Jews have been forced repeatedly to leave countries to avoid persecution (and this includes three of my grandparents and the great-grandparents of the fourth). As a relatively non-religious Jew, I think I subtly absorbed the belief that our human capital is what we can take with us even if our fixed assets cannot be moved and thus requires serious investment. [Example on the value of education: I was fortunate to attend three of the best educational institutions in the world. But, I didn’t find my first graduate program, which I chose because it was the best in the world by reputation, to fit me well and decided to leave. When I left, my mother said, “But you are going to get your PhD in something, aren’t you?”]
We knew that we would not qualify for financial aid. So, we put aside the most we could in 529 plans. That will cover ShawD for a 5 year (including summers) BS/MS – there should be a bit left over – and ShawSon for his BA and MS and much of his MBA. He has seen that a number of his classmates gamed to set up assets correctly to get MBA financial aid. Perhaps we could have done that if we had been thinking that way but we were not. If we had not saved, it might have been better for him to get a PhD, for which he could get full support, and then go into business, but I think his current path really suits him.
ShawD attended a public institution for one semester and transferred to a private institution. Had she taken a gap year (per my suggestion), it is possible that she could have figured out her new field at the public and not needed to transfer. She could then have pursued a similar path in two steps at much lower cost – however, MS programs in her field are quite selective and I think we were very happy that she was automatically admitted. I think ShawSon is an unusual package (prodigious intellectual gifts and serious learning disabilities) who benefitted greatly from going to a small elite school. In small classes, professors quickly learned how bright he was relative to most of his classmates and saw how hard-working he was. That would likely have been hard to find at most publics (but undoubtedly we could have found a way to make it work if we had to).
I am sure we are unusual in that we only saved enough for 4 years of room & board. When d was in 7th grade, she scored high enough on ACT (taken early thru gifted program) that- combined with her straight As, would likely make her a candidate for scholarship. She had a very expensive extra-curricular, which we allowed her to continue in- provided that she kept at the same level of academics for scholarship purposes. She ended up with a full ride scholarship, so we will save her college fund for graduate/ professional school. BTW- cost of the extra-curricular activity. was almost as much as the cost of tuition, room & board at a state school.
My wife and I have a simple rule: kiddo(s) either get 50% of a private school education or 100% of a UC. We’ll have enough to cover it for two kids at that 50/100 range. Well, assuming that our government doesn’t bankrupt everyone.
If.
I had about $25k for each child when they were 16, 10 and 9 – then it all went to hell because of a divorce.
I saved nothing for my oldest children. I paid for my D out of current income but she had a number of scholarships that were not GPA/test score related (e.g, community service based) and then she became an RA. When son 2 (child 3) went into college, I inherited a small sum from my aunt and used that for a 529 for the youngest (S17). I used some to pay for S3’s tuition and have enough left to meet the current gap between a SUNY (which I can pay from current income) and the largest merit award he’s received so far. IF he becomes and RA, that money could last all 4 years instead of just 1 1/2. If I have to, I will either take out a home equity loan or tap H’s SEP, since he is past 60 and can withdraw with no penalty. Two of my sons attended CC’s and I paid out of pocket. One year, I qualified for $500 in state financial aid!
Like other writers, I chose to fund my 401 (k) as fully as i could and to buy a second home as an investment.
Wondering what parents of multiple kids feel about spending the same amount on each one? We have three - oldest is at inexpensive local trade school and will spend 4 years there for about $20K, middle is looking far and wide at the best school he can get into, which is currently Tulane, youngest is soph and already being contact by colleges for athletics so may have some opportunity (with her 4.0 also) to get through less expensively. We do expect our kids to contribute, and each will in their own way. Oldest by staying close and paying for everything except tuition, middle through generous merit scholarships, youngest potentially with athletics. I wouldn’t want to fully fund a Tulane undergraduate and not have my oldest receive equal benefit of some sort. We are considering rolling his leftover 529 money down towards his siblings and helping him with a down payment on a home instead.
@threebeans – We have separate 529 plans for each kid, with just about equal amounts (factoring in average increase in tuition over the 4 year age gap between kids). There is enough for each kid to fund 4 years of private college at full pay. We have told them that whatever is left over after they finish their degree is theirs to keep. So if it takes them 6 years and they use it all, they’re left with nothing. If they go to private or out-of-state with no merit money, they’ll most likely have nothing in that scenario also. But If they choose in-state or get merit, then they get the surplus.
They start off with the same amount of money, but it is their choice how to expend it. They also get some skin in the game and have incentives to graduate on time (or early) and/or get scholarships.
@2014novamom, not sure how you turn over the surplus of 529 account to your child. It will be penalized for not being spent on educational expenses.
For my two children, I kept about half in their UTMA accounts and half in their 529 accounts, and am spending down the 529 accounts first, so whatever is left in the UTMA accounts they can keep for grad school, downpayment etc… The problem we have faced is that the older one had much better investment performance in her account than her sibling so there’s about a $40,000 difference to make up.
@threebeans, we planned to pay for in-state tuition, room and board for both kids. Oldest got a fairly significant scholarship so we let him go to an expensive private. Youngest had no interest in going to a private, and by his choice wound up at in-state flagship. I will not be giving him any money to make it “equal.” It’s possible that at some point in life he will get something more expensive, or we will balance it in some other way, but they both got what they wanted, and I don’t feel like everything needs to be monetarily equal. We did set a “Max amount” we would pay for older son (he agreed to take loans for the rest), and planned to stick to it, but I decided to pay off his loans at graduation.