Saving for college- what worked for you? What strategies do you have.
As the mom of a 2yo we're starting a college fund. The calculators are pretty depressing that it's going to be like 400k by the time she goes. I'm curious what people have done. Do you have % goals by age? I'd really like her to have the benefit I had of not having to deal with debt as I can see how hard it is for people to pay it off. I'd love any advice.
I let my kids know that I would pay for tuition/fees to a state school, and books. They can live at home. Otherwise they can take out a loan for the difference.
My daughter has decided to go to a state community college to start, saving me some money, and live at home. She decided she didn't want to start her adult life with loans.
Right now our closest 4 year state school is $11k per year for tuition/fees. Books have been about $500 per semester. It seems tuition has gone up an average of 5% per year. My son is younger, so I calculated how much I think it will cost when he hits college age and divided by the number of years I have to save to get my yearly savings target. Pretty simplistic, but it will do for now until we get closer. Then I'll re-evaluate to see if on target.
I opened up a 529 account through the Utah 529 plan since they have the lowest costs. I picked an age based glide path investment plan. (If you do this you could lose money, but the market seems to eventually pick back up so I don't worry about it. I can tolerate the risk of loss. If you can't tolerate losses then choose your investments with that in mind.) If you have a state plan that allows a tax deduction it may be a better choice.
We set aside as much as we possibly could from the time our children were born. We just used the 529 Fund (California's is called ScholarShare) and my older son started drawing on it two years ago.
Most raises were split between retirement funds and college funds: we figured if you never saw the money, you'd never miss it. I have a habit of not using coins - I'll just dump the contents of my pockets in a jar, and when that is full, off to the bank we go! We've done all right with these ways of savings.
Don't tell me about what you can't do. That's boring. Show me what you can do. - Mom
We started saving when my son was very young, and budgeted for a state school. We also told him he was responsible for paying for the first semester and if he passed, we'd reimburse him. Then he could pay for the next semester, and if he passed, we paid. That solved the problem of him flunking out and us taking the financial hit. We also said we'd give him 1/3 of any scholarship money he got as a bonus. That encouraged him to get (and keep) scholarships. It worked out well. He got an education and we didn't get screwed financially.
I know it does not apply in the US, but in Canada, we have the Registered Education Saving Plan http://www.hrsdc.gc.ca/eng/learning/...lic/resp.shtml The money grows tax free.
It has been great! We had enough saved for our son's two year college diploma and daughter's 4 yr university degree.
We saved whatever we could (after tax $$), the government contributed 20% of our deposit per year (up to a certain max.). If our children had not gone to post-secondary schools, we had the option to transfer the funds (minus the government participation) to our own Registered Retirement Saving Plan.
The money was withdrawn in our children's names and they did not pay income tax on it since they had no income. Plus now, my daughter is working and she can claim the tuition on her tax return.
It worked for us!
My family gave me a wonderful gift. The day I was born my grandfather opened a savings account for me. He made my parents a deal. For every month that they deposited $25 he would deposit $50. They did this every month and then invested the money in mutual funds.
By the time I reached college age I was able to go to college without debt. It made a significant difference in my life. I attended both undergrad and grad school on that money.
Obviously, investing it wisely is half the battle, but the power of compound interest plus them starting so early made it work well. This was many years ago so there weren't special education funds, but those sound like a great idea.