<p>We started saving when the kids were born, by putting all our changes and all our ones in a jar at the end of the day. When that totalled $2000 (about two years), that was invested in the stock market (UTMA21 accounts). As our income increased, so did the amount that when into their accounts. </p>
<p>The dotcom boom gave us some major income windfalls and much of those windfalls went into their accounts. At the peak of the market (2001), we had about $100K in each account (big successes: Cisco, Intel, Starbucks, Microsoft). However, the actual amount we had in each kids account when they started college was closer to $80K (with most of the stocks now in more conservative investments, like banks and index funds). By taking out an amount corresponding to 1/N where N is the number of semesters left (1/8th the first semester, 1/7th the second, etc.), we have continued to benefit from the improving stock market, and with 3 semesters left to pay for have $40K left. </p>
<p>While I am aware that many schools estimate $42K/year right now--and MIT is one of them--I have found my kids' actual expenditures to be about $2K less, mostly because neither of them is on meal plans. They also buy as many books as possible used. (My son is especially good at finding free copies of textbooks by scavenging from graduating seniors at the end of the semester.) My daughter buys a lot of her clothes at thrift stores; my son is a big believer in "wear it out, make it do, or do without" as far as clothes go.</p>
<p>Jolynne, sorry if our "formula" was a bit difficult to interpret, since it's not really complicated at all. Yes, EFC is our estimated family contribution. We took that number (which I updated periodically if our income increased) and added $5000. The reason for the extra $5000 was because we had heard (and have since had confirmed by CC folks) that the FAFSA EFC may be lower or higher than any given school's estimate of our EFC. So we gave ourselves some wiggle room... The x 2 part was just that our original goal was to have two years of the EFC saved up by the time our daughter (only child) started college. </p>
<p>As I mentioned, that hasn't happened because of underemployment or unemployment of my husband and because of some unexpected medical expenses. We still have a way to go to have just one year of our EFC put away, but we'll make it work. Our goal now is to avoid parent loans, so that we can help our daughter with any student loans once she graduates.</p>
<p>And add us to the list of those putting off new cars and home improvements; we figure we'll be so good at scrimping and saving by the time our daughter graduates from college that we'll be able to handle those expenses without flinching :D.</p>
<p>20 years ago when he popped out, we soon realized that we could never "save" enough money for the type of school we wish he could attend. Based on the projections at that time, college costs increased at 6%/year. (ultimately, the costs increased closer to 7.5%/yr)</p>
<p>Since we couldn't "Save" enough; We "Invested", in other words, we went for "shoot-for-the-moon." We invested $200-$300/mn for years until the Rule of 72 kicked in. We figured that if we didn't make the moon. at least we had a shot at it and we would probably be no better off than if we had "saved" for the college costs. Got it?</p>
<p>529's are OK but currently there are more advantages to opening a plain ole UGMA or joint account. Your advisor is parrotting his company's line and taking the easy route.</p>
<p>Taxguy's comment about MD state schools not having good graphic design/media programs reminded me of something. If your child is looking at an unusual or unique major it is worth contacting your state's Higher Education Commission to see if the state participates in any type of academic common market. Here's an example, in Maryland none of the state schools have a fashion merchandising program, so a student declaring that as a major may be able to go to U of Delaware at in-state University of Maryland rates. At least that's the way it was explained to me. It's certainly worth looking into. Trying not to hijack this thread, just wanted to share some info and this seemed like an appropriate place since it's all about the money!!!</p>
<p>I feel like h. and I have been inhabiting an alternate universe. College funds for kids from birth? It didn't happen that way for us. In early married life we put money into IRAs. H was in PhD. program so we owned no real estate- had no money. When #l was born we lived (hand to mouth) on h's salary. When we finally did buy a house, we had to stop contributing to retirement just to make payments on our <1,000 sq. foot fixer upper. Now that cash flow is better, it's flowing straight into the college's coffer, so I guess you could say it's all worked out. #l is at college of his choice. Hope to do the same for #2 (there's more than a four year gap between them).</p>
<p>It isn't that we weren't aware - we educated ourselves (I have master's) and weren't in positions to sock away much cash for kids. Nor would I trade places - we've enjoyed our educations and place great emphasis on it for kids. We'll do all we can but should they choose post-grad work, unless something changes drastically in our lives, they'll be responsible for it, just as we were.</p>
<p>We checked out the academic common market here in Maryland. Most of the schools available to us as Maryland residents, with majors that my daughter would be interesed in, are the crappiest choices around. These are schools that probably have openings because no one wants to go there such as Shepherd College, Radford College, Fairmont state etc. Maryland does have exchange programs with Texas and Virginia who have great state schools. However, none of the good ones participate. Thus, University of Texes, UVA, even VCU doesnt have the programs available. It's too bad. Maryland could have allowed to attend any good state school,which would have made the program fantastic. I guess this program is better than nothing,but it isn't anything great.</p>
<p>We started saving when our son was born, contributing regularly to his "college fund". We also bought $7500 zero coupon bonds that year when we purchased a new house, taking that money out of the sale of the old house. The bottom line is that we had saved $78,000 by the time he went off to college.</p>
<p>Because we had done our part, we expected him to do his part, his part being responsible for tuition, books and spending money. He reseaerched his butt of to find colleges who had good merit award possibilities and chose to attend RPI who are giving him scholarships totalling $25,000/yr. </p>
<p>We pay for his room, board, and medical fees which totalled about $9000 last year. Because he is moving into an off campus apartment this year his housing cost will be $3-4000 less but we will continue to chip in the $9k/yr.</p>
<p>He spent about $10,000 from his college fund but part of that included the purchase of a car during the summer which was left home.</p>
<p>He is hoping to have about $50,000 left in his college account at graduation which he wants to use for a business startup, something to do with robotic motion optimization using a fuzzy logic algorithm that he will be working on next year. He applied for an undergrad research grant but plans on doing it even if Institute $'s don't come thru this year.</p>
<p>i know this is kind of off topic, but do you think the price for college will ever hit some sort of ceiling? Because, I mean, I'm an entering freshman at Columbia and at first the financial package was $47K and now i just signed a revision at $49K!</p>
<p>It will stop when people finally realize that the "prestige" factor isn't worth the price, and there is a fall off in enrollment at the more expensive colleges. Simple economics: the price is set by what the market will bear.</p>
<p>However, I don't see this happening anytime soon, because the elite colleges cater largely to very wealthy families, and those families will continue to pay whatever it takes to get their kids in. Need-based financial aid in essence keeps costs fairly stable for the middle class - tuitions may rise, but the EFC is likely to remain stable for a family with a consistent income. As the tuition goes up, the level of income needed to qualify for aid also goes up - a family with an EFC of $35K would not have qualified for any aid 10 years ago, now they will be getting aid to make up the difference between $35K & $49K.</p>
<p>Of course, the upper middle class families are the ones who get caught i the squeeze -- too much income to qualify for any financial aid, not enough for them to take a $50K annual expenditure lightly.</p>
<p>We tried to save but it didn't really happen till son entered H.S. Fortunately our incomes rose, we kept our expenses the same. This really worked for us. We have the funds for son. When we finally had the money for the 529, I played around with the calculator and it really was too late to come out ahead(after fees) H just paid Fall tuition today. Actually he used Discover, last yr we got >$200 back from Discover. We pay off the bill when we get it. </p>
<p>Such a change from when I had to fill out paper work and borrow all that money for my education. Took almost 20 yrs to pay off 20K.</p>
<p>Very similar to Lamom. We had a very limited income and high debts until about when older child started HS. When income went up, we kept expenses the same (older house still in dire need of repairs, low/middle income neighborhood, very old cars, not-so-great public schools, very limited "enrichment" stuff for kids, very limited vacations, etc.) We were able to pay for D out of pocket while continuing to save for S. Which makes it possible for H to quit medicine and train for teaching now--S's tuition is in the bank. We had about eight relatively high income years, which coincided with college, and basically it all went to that. Which meant no aid, which is fine--we're happy to be able to cover that, and neither us nor kids have loans. They'll be on their own for grad school, houses, etc. But they expected that.</p>
<p>Banking some bonuses, a small inheritance from the death of my parents, and some pretty good investments, allowed us to accumulate about 60K for each of our two sons as of the time the older one started college (he's now a rising senior). As it turns out the older one is at an expensive private; the costs over and above the 60K are coming partly from current income and partly from a second mortgage credit line (house has skyrocketed in value giving us extra equity). The younger one, now a rising HS junior, is likely to end up in state school, for which his 60K should cover it with room to spare. If he goes to a private, I'll do the same as with the older one -- tighten belt and pay from current income, plus add more to the second mtge.</p>
<p>Older one wants to go to law school for which I'll chip in as I can, but much of the cost will have to come from loans and hopefully scholarships. He'll have to bear the loans.</p>
<p>Procedurally, if you are in a high tax bracket I recommend the UGMA account. Income is taxed at the child's rate once he attains age 14; the temptation to dip into the money for your own purposes is removed; and it can be set up to last until the student's 21st birthday, which means that it will be spent on college before he can get his hands on it.</p>
<p>That is one advantage of having kids later in life--college years are more likely to coincide with peak earning years. Problems--peak earning years are followed soon by retirement and the aging of parents. If you waited too long to have kids, you've got all the wolves at your doorstep at the same time.</p>
<p>I started having automatic deductions from my pay twice each month for Series E Savings Bonds when each of my sons were born. When they went to Series EE or whatever the next series was, which didn't have as good an interest situation, I stopped buying them, but my older S now has about $15K-worth which we're cashing in this summer (but if we don't, they'll continue to accrue interest for a few more years anyway -- not a <em>lot</em> of interest, but some). We also started UGMAs for them and made regular deposits, even if they were small amounts, then started 529s. We found that the accounts where we invested less conservatively have done better than the ones where we figured we'd play it safe. Actively paying attention to the investment choices in the accounts and tweaking them for best return has made a noticeable difference over the accounts that we sort of ignored. Like dmd77, we had some minor dot-com income and put it into "the college account". My husband and I both still have stable, senior positions in our companies, hence our EFC is "everything" -- no loans/grants expected (I didn't even fill out the FAFSA, suspecting it was likely to be a waste of time.) When we refinanced our mortgage about 2 years ago, we included a "1/4 % over prime" home equity loan option, so if we need to borrow we'll activate that first. </p>
<p>Older S is going off to college this fall, and we believe we have enough to pay for all four years at MIT. (Thanks for the info on saving $ on the non-meal plan, dmd77 -- I'm counting on that, too.) Younger S, who is a rising HS junior this year, is more likely to spend his college years at a UC, which is good because the difference in costs for S1 and balance in "the college account" is not sufficient right now to pay for four years at a private for S2. (Maybe we <em>will</em> do a FAFSA once we'll have two of them in college at once.) If either of them choose grad school, they're on their own. (We do have aged parents and impending retirement of our own.)</p>
<p>We know we have been very fortunate to even have had some assets to invest, but at the time the kids were born, we didn't. Yet we started to save a little bit monthly even back in '87, and bought those Series E bonds without fail. And then tried to keep "money for the boys' educations" in the front of our minds whenever there was a financial decision to be made.</p>
<p>Regarding Prepaid Tuition - as opposed to 529 plans:</p>
<p>If your student ends up attending an out of state school, the prepaid tuition is likely to be regarded very differently than other savings, including 529 savings. Our 529 funds are considered assets like any other savings (and there is a limit as to what portion of your assets a college will demand in determining EFC). The prepaid tuition however belongs 100% to the the college. That is, the college expects to recieve 1/4 of that fund each year, above and beyond EFC. It is not a source of funds we can tap to help pay our EFC.</p>
<p>I started saving the day he was born. I used tax refunds during the 80s to make investments in state zero coupon bonds, which were then converted to US savings bonds when they came due. We had a rental unit in our house and the accelerated cost recovery system was bringing in refunds of $5,000 plus. For a while I "owned" public housing in Richmond VA and a dorm at the University of Illinois. I refinanced the house, at a lower rate, took some money out and bought a prepaid tuition plan in Virginia. I also began setting aside a substantial amount of cash when he was in high school. By the time he had graduated we had $108,000 including his small scholarship and unsubsidized Stafford. I haven't had to go into the savings bonds yet, and hope not to, and am able to pay his expenses out of current income. </p>
<p>Both my wife and I were well into our careers when our son was born. We were paid well, and my wife has been promoted to a fairly high level. We did not have to scrimp, we sent our son to private school, and invested substantial sums for our retirement, but we did not waste money. We saved by not buying the most expensive house we could have afforded (it still has the original 1972 kitchen, the stove is the brown equivalent of avocado green), didn't buy a vacation home, and bought reasonably priced cars. </p>
<p>Wow, lots of different, effective approaches for saving money! So interesting and helpful to hear how others have done it, from putting extra change into the savings jar to new types of bonds I've not heard about before.</p>
<p>I'll look into the zero coupon bonds.</p>
<p>I admire those who were able to forego housing, etc. expenditures for the education fund. Our family has brand new house & car which eat up an incredibly high percentage of the income....it's really worrying me, but I'm hoping my work will free up funds for education, and should progress and generate more $$ over time. We're also getting into some <em>serious</em> budgeting and spending analysis right now! Impulse spending is now (hopefully) verboten!</p>
<p>Any thoughts on if an UGMA or 529 is better (for 9th grader or 3 year old)?</p>
<p>We did it a little differently--our financial advisor told us that if we could swing it, we should just put a big chunk away right away while our son was small, and let it grow, instead of making smaller regular contributions. So we did that a few years ago when he was a preschooler.</p>
<p>My son is six and I think that account is a little over $30,000. I doubt it will grow to be enough, but I'm reluctant to make it bigger because saving for retirement is now a bigger priority. I make small, regular contributions to my state's 529 to bolster it a little (plus reap some tax savings from the state).</p>
<p>Even the best laid plans . . . We also began contributing to college accounts when our boys were wee. Then we were introduced to a wonderful private elementary school and, well, I guess we didn't love our safety (public) enough. We have been playing catch up for the last six years and will manage with a combination of savings, current income and maybe a loan when the two kids overlap.</p>