Comments on: Simple but Important Calculation: How Much Should You Have Saved for College Today?

By: Bdahl

Bdahl — Fri, 02 Jul 2010 11:03:03 +0000

Make a shift to your thinking, I am one of those advisors that gets paid to do this for a living. I would not think about how to save for college, but rather ” how to pay for college”. Don’t use 529 plans or savings bonds, they count against you in your expected family contribution EFC or FASFA. 5.6% if in your name, 20% in the kids name. Load up on everything that is “hidden from” the fASFA form.
401k, IRA, Cash Value Life, especially a Roth. Make yourself look poor to the government. Then you will qualify for more aid, grants. When you get to college shift your savings around and pay part from your cash flow, part from Roth, Grants, Aid, Loans and make the kid work and contribute $3000 a year. If you piece it all together, you might have to work a year or two longer before you retire, but you will not strap your kids with 100+ thousand in debt. Just saved you all $900 dollars, which is what we charge for the planning.

By: feistyboysmama

feistyboysmama — Fri, 25 Jun 2010 14:04:27 +0000

We are aiming to save about $40,000 for my son’s education. That is about half of what it will probably cost for him to spend 4 years at a state school. He’ll be responsible for coming up with the rest, and if he wants to go to private school, he’ll have to make up the (considerable) shortfall with scholarships, loans, etc. Even having $40,000 for his education will be better than what his dad and I had when we went to school – at the time I went to college in 1994, my parents had saved about $2,500 for me, which was gone after my third semester at a small state school. My husband had $0 from his family – he had to work the entire year before HS graduation (including working 2 jobs that summer) to even save the expenses to move to college; his mom was a single mom and a teacher, and needed the money he earned to support the household. Both of us worked multiple jobs while we were in school, in addition to working summers. My husband dropped out twice to work full-time for a semester to save enough money to go back; I worked three jobs for a couple of semesters (college newspaper, city newspaper as a stringer, and in the college’s food court). We both got academic scholarships and maintained them; my husband was able to get a few grants. Other than that, what money we had, we worked for. We both got our undergrad degrees and my husband got his master’s degree, when it was all said and done. When we got married we had less than $15,000 of loans total, which we paid off with an inheritance shortly after we got married.

In our state, anyone who graduates from a state high school with a 3.0 GPA can go to a state school for free tuition; they just have to cover books and living expenses. I was not eligible for this “free ride” when I graduated; my younger brother was. He washed out of school within three semesters having cost my parents a few thousand dollars in expenses. When you don’t pay for something, I think you have less investment in it.

We are putting my son through a moderately-priced, religious pre-K through 12 private school. And we are trying to save more for retirement, now that our 401Ks were decimated in the 2008 recession. Let’s face it – the crash of the economy put a lot of us way behind where we need to be financially. My husband lost his job just prior to his 401K at his old job vesting, which cost us thousands. We would love to save hundreds of thousands for my son’s college, but it’s not going to happen. We need to make sure we’re saving enough to cover our retirement and old-age expenses, because we can’t get loans for that. We also want to be able to live a nice life, taking vacations, living in a “good” area, etc. We don’t have an expensive house or drive new cars, but I can’t see living in penury for 20+ years so that we can save hundreds of thousands for an education my son may or may not decide he wants. At the end of the day, there’s always Western Governor’s University online and he can live at home – he’ll still end up with a degree, and we can get him a gym membership for $30 a month to make up for the Club Med-style amenities most colleges seems so focused on these days.

People with sufficient determination get where they want to go – they figure out how to make it happen. My husband I did, anyway. My son is smart, and he will too. I wouldn’t be upset, frankly, if he skipped the four-year degree and went for something else where he could be more assured of earning a living. We have a friend who’s an electrician – never went to college – and makes more than my husband and I put together. At the end of the day, education is about the ability to earn a living, and I don’t see a lot of colleges focused on that any more.

By: Aury (Thunderdrake)

Aury (Thunderdrake) — Tue, 25 May 2010 02:40:13 +0000

For what homes cost today, it’s quite brutal. Staggers me to see the amount just to go to school…

…Makes me glad I decide to pursue entrepreneurship, self employment and writing…

By: Elliott

Elliott — Sun, 16 May 2010 00:23:54 +0000

Two words: community college (full disclosure: I’m a prof at a California 2-year). Why spend the kind of cash that has been so well outlined in this article so that your kids can sit in an auditorium with 300 other undergrads while an overworked TA goes through a one-size-fits-all presentation on [insert subject here]? That same class is being offered at half the price (maybe less – in some states rates are as low as $25/credit hour) by an experienced professor with a PhD. Don’t believe Hollywood’s latest caricature of community colleges. There is quality teaching going on at your local 2-year institution. And don’t assume that just because a university has a great reputation and a fat endowment that the teaching of freshmen and sophomores is anywhere near the top of their priority list. True, the experience of dorm life is not possible at most 2-year’s. But I had that dorm experience, I’m still paying the student loans incurred getting that experience, and I can tell you that the experience is not worth the money my children and I will be asked to pay for that experience in 10-15 years. And true, there are students at community college that are struggling to figure out their direction in life. As someone who was an overworked TA at a large private research university, I can tell you that the amount you pay in tuition has very little to do with the academic motivation and prowess of the students in attendance. The value of doing the first two years at a community college would be hard to understate.

By: Money Reasons

Money Reasons — Sat, 15 May 2010 13:28:56 +0000

Yeah, I feel your pain! I have $40,000 saved in a 529 plan for my son (9 year old) and a comparable amount for my daughter age (she’s 6), but by the time they are read to start college, I’ll still be short…

I’m really hoping for scholarships (my sister had a few of these), and if that doesn’t do it, financial aid. In the mean time I’ll keep pumping money into their accounts (no wonder I’m so frugal…)!

By: Budgeting in the Fun Stuff

Budgeting in the Fun Stuff — Thu, 13 May 2010 16:24:14 +0000

Wow…now I know why my parents didn’t pay my whole way. Of course, my whole 4 year degree “only” cost about $50,000 from 2001-2005.

By: Earn Cash Now

Earn Cash Now — Thu, 13 May 2010 06:04:40 +0000

There is one tool that is great for wealthy people to use and even non wealthy people. that tool is a whole life insurance plan with additional premiums. Just make sure it doesn’t MEC. If you can do this you can store lots of cash away and since the money is in a life insurance contract it is excluded on the FAFSA financial aid form. There is no better way to save and grow the money then in a whole life contract. Currently the only company I would recommend doing this with is Northwestern Mutual.

By: Investor Junkie

Investor Junkie — Thu, 13 May 2010 03:59:54 +0000

The other factor to consider is financial aid. Unfortunately the more money in 529 the less likely you’ll qualified. 401(k)s and IRAs do not count.

By: Investor Junkie

Investor Junkie — Thu, 13 May 2010 02:59:40 +0000

Ugh going through the same planning with my three kids. I need to run a monte carlo simulation with different returns to determine the chances of getting the proper amount saved for college.

My comments:
In my state (NY) we get a tax deduction for up to 10k invested jointly. So I’ve decided to only invest up to 10k for all three children. After this I plan on investing in US Savings I Bonds and putting money into our Roth IRA accounts (since they can be used penalty free for higher Ed)

You are correct that some children may not go to college. So I would rather have our Roth IRA fully maximized and more general purpose I Bonds. In addition your retirement savings should always be funded first before college education.

Finally based upon other asset allocation monte carlo test I don’t think it’s ever wise to be 100% in stocks.