View Full Version : How do you determine how much you need to save for college?
Feb. 24, 2013, 06:03 PM
Just curious how to know a target for college savings. I have a toddler and am trying to set a goal savings amount. At the rate costs are going up it just doesn't seem sustainable. Do we assume an 8% annual increase for 15 years?
Just curious how people determined how much to try and put away. Not knowing where she will want to go etc.
All of the student loan threads make me really want to try and keep her from getting stuck in that.
Feb. 24, 2013, 06:12 PM
Well chill.... it will be insurmountable. And unless you are so wealthy that you are wondering if you should siphon off your money to some other enterprise, the right answer is Save Like A Banshee From Conception.
Oh, and make sure that you open BabyGenius a 529 account (tax free) and contribute the maximum allowable amount each year. You can also gift up to about $14K per year to individuals without taxation.
So, yeah, college will be very, very expensive and freedom from debt will be a wonderful gift for BabyGenius. But saving in a way that minimizes the taxes will help you guys make the most of what you do have to sock away.
Feb. 24, 2013, 07:17 PM
Definitely open a 529. We started one for Losh Jr. right after he was born. Check with your state -- most states have a variety of programs and you can pick the one that fits you best. Ours will allow him to attend any college in the country, others are for in-state only. Some friends of ours lucked into a sweet deal where they could sign up and the kid could attend ANY state university for the tuition price for the year they signed up (it was for a limited number of kids and I'm not sure they do it any more).
Feb. 24, 2013, 07:41 PM
I'm not familiar with the latest rules, but is there a way to make sure that the college savings goes for college expenses? Anything gifted under the Uniform Gifts to Minors rules belongs to junior when he/she turns 18. So yes, you can set aside around $14,000 per year for the little darling to go to school, but at age 18 it's theirs to do what they want with it. Does money put into a 529 plan revert to mom and dad if kiddo doesn't want to do school?
We saved quite a bit of money for son's schooling and made him pay for the first semester himself, with his money. When he passed, we reimbursed him. We also paid him 1/3 of any scholarship money he got upon successful completion of the semester. He got an education and we didn't get stuck financially. I learned this from my parents, who put my brother through school three different times. He never graduated, and never got a good job.
Feb. 24, 2013, 07:43 PM
Current cost for four years about 120K. Over 18 years that's oh, 6500 a year or 500 a month. Interest helps a lot, you know, the power of compound interest and all that, but to be honest I never had $500 a month extra to apply to anything when DD was little. Daycare ate it up, then after school care took a chunk, maybe I'll take a loan out of my 401K, it's getting close to that what with agency matching for 20 years, but nobody matches your college fund!
DD is getting tons of junk from colleges right now. Vassar is 57K annually.:eek:
Feb. 24, 2013, 08:13 PM
gee, I don't know... our four kids... it was over $250,000 not including the $125,000 of scholarships
And the one that hit it big time didn't graduate... dropped out between junior and senior semesters after doing an apprenticeship
Feb. 24, 2013, 09:00 PM
Thanks! We have a 529. I'm just struggling with how much we should be putting in.
I told my husband if she doesn't go to college I'm going to architecture school with the fund.
Feb. 24, 2013, 09:10 PM
You put away what you can without ruining your current life style. Once the child gets close to college age there are any number of tactics for getting them through school without breaking the bank or having them be in debt up to their ears when they get out.
Probably the number one thing is to keep a clear head about "elite" schools. Sure, it'd be nice if Junior got into Harvard, but a number of studies have shown that a degree from an exclusive college only confers about a 6% premium over a life time above some one who attended a state college. It is not a winning proposition. As I mentioned in the vet thread, there are some really good articles about colleges that deliver the best bang for the tuition buck. Elite schools are not on that list.
The other good thing about keeping a clear head is that your child can have a normal teenage life. No over stressing, pressure pressure pressure - and that goes for the whole family. Teens especially do not need the stress of being pushed towards highly selective schools.
We saved some for college, have used some loans, and were lucky enough to have both sons get scholarships - one a full ride. We are a little in debt and so are they, but I wouldn't trade all the great vacations we took together and all the fun things we did as a family as we spent a little money when they were young rather than save everything.
Feb. 25, 2013, 01:26 AM
Set aside what you can the earlier you start the better. Compound interest is your friend! However, saving for your retirement is is also hugely important. I know that isn't what your post was on but I wanted to mention it. Children can always borrow for school you can't borrow for retirement. Sounds like your family might be in need of a financial needs analysis to really game plan a financial plan for he future and help you determine what is best. Good luck!
Feb. 25, 2013, 06:33 AM
College savings plan...MD has two, a 529 and something called the prepaid college trust, that is what we did and it has help beyond expectations, son had no loans at all when he finished, DD will have small amount. We paid in while they were younger payment was less than $400 a month. On the prepaid you basically pay for the education at the current price, but you get it back at the higher price when the child goes to school, based on the Average tuition for state colleges, can be used at any college in US, you choose how much you want to pay for (2 years worth or 4 years worth). If the child goes to a MD state college, it's already paid for, don't know if other states have the prepaid plan or not. Payments from the plan are made directly to the institution and can be transferred between children, say if one doesn't use theirs.
Maybe also look into savings bonds.