Saving for college??

[1_pointer]

I'm lazy and an idiot when it comes to investments and money things. About the best I do is to keep an Excel spreadsheet that allows me to pay bills without overdrawing any accounts. That said...

With my son's 5th birthday last week and our households income about to change with my wife finishing up with school, I've been thinking alot lately about what to do for college funds. More specifically, where do you keep them? I've looked a bit into some of the 529 options, but have some reservations. I realize a regular savings account is safe, but there's no growth. A jar buried in the back yard has some appeal with it's simplicity, but then I have to account for my laziness and ability to remember where I put it.

So how about you folks, where are you keeping the kids college money and why?

 

[SDHNTR]

As an investment professional, I highly recommend the Section 529 plan. You can invest up and down the risk spectrum, and the tax benefits are great. If there are wealthy grandparents (who need to reduce their estate, especially with the estate tax exemption about to be reduced) in the family, it makes even more sense. What are your reservations?

 

[Nemont]

with one already accepted to Pharmacy school and another who will be a college Freshman next year all I can tell you is that you will most likely never save enough. We started when our kids were born and my oldest will be through her third year and we have not had to borrow any money but that is not because of what we saved for college.

Even with all the savings she has maximized scholarships and spent last year and this year as an RA. My younger daughter has already started on the scholarship trail as well. No guarantee but we should be able to get her through her BA without borrowing money. Any graduate school is a wild card and kind of on them IMO.

We did the 529 plan for all three of ours.

Nemont

 

[1_pointer]

SDHNTR- My biggest reservation is the potential to have less than what I put into the fund when it comes time to start paying out of the account. I know that's pretty unlikely, but there it is. Also, there is no certainty the boys will go to college and I guess I'd rather pay taxes now vs. then. This is a small possibility (both the wife and I went on to graduate degrees), but again there it is. Do you have a suggestion as to whom to set up the 529 through or does it even matter? I can do so either through the state of Indiana or through my personal bank.

Nemont- I fully understand the costs, as we're currently still cutting checks for my wife's school and my student loans. Just hoping to take some of the sting out of it when the time comes. I agree, graduate school will be on their dime! Mine was... Hopefully, I can convince at least one of them to sorta follow my career footsteps but to make a better decision as to where to do that work! THanks for the tip on the 529.

 

[SWMontana1]

1 pointer - if you are really worried about the cash value and having someone, or a company take care of your 529 for you.... I would recommend you take out the 529 through State Farm.... you should look into it. They are obviously a very sound company, but they are also conservative. Can't go wrong.

 

[BuzzH]

I have a different view...do any kids hit a lick and pay their own way anymore?

I see lots of friends who have taken second mortages on their homes, worked several years later than they intended to, taken out loans, etc. to pay for their kids college. Most of them dont even find a problem with their kids sitting on the couch on their sorry asses not even working during the summer.

My parents didnt give my brother or I a single penny for college...tuition, books, vehicles, etc. was all on us.

I'm glad they didnt for a couple reasons.

1. I would have rather they spent the money doing things WITH us when we grew up versus giving us a big wad of sweaty cash for college.

2. On the life lesson scale, paying your own way for college makes you grow up.

3. You come out of college with a degree AND some job experience. Something that is very lacking in todays world.

4. Theres flat nothing wrong with kids paying their own way.

I punched in 50-80 hour weeks running one of these for 7 seasons/summers, took me 6 years to get through college. I came out with NO debt, a degree, and one hell of a lot more work experience than 99% of those I graduated with.

 

[SDHNTR]

1_pointer, there is a common misconception that 529's are invested aggressively. That is not necessarily true. You can select a conservative investment option that is low risk (likely low return too), if you prefer. My suggestion is to go with something balanced, or "age based". That way the investments are more growth oriented while the child is young, and then more conservative as the child nears college age.

Why would you rather pay the taxes now versus then? I don't know your age, but if you are working now, and will be retired then, you would likely be at a lower tax bracket and it would behoove you to pay later versus now. In regards to taxes in the event the kids do not use the funds for education, it comes down to your tax bracket now versus when you expect to withdraw from the 529. Also keep in mind that the earnings grow tax deferred too, so you are not paying taxes on the earnings each year the way you would with something in a standard bank or brokerage acct. That extra amount not taxed each year accrues exponentially over the long term. Also remember that 529 funds can be transferred to other family members and can be used for trade schools, not just universities.

I don't know about your bank and what they may offer you, but I'd just go with whichever plan is cheaper -- provided it still offers the investment options you desire. There are some very minor tax benefits for sticking with your in state plan, but that may or may not be worth it depending on what investments are offered. Or, if you already have a relationship with a financial advisor, you may just want to open the acct. with him or her to keep things consolidated. Good luck.

 

[T Bone]

With our four kids, what we have saved is about enough to get them through one year each at the current tuition rates. The way tuition is increasing it may be enough to buy a cafeteria meal plan for a couple of semesters by the time they get there (ages 15, 13, 10, and 6).

Mine will need to be working during school and during the summers to make it. They realize that we're not the full ride scholarship.

 

[MNHunter]

I’m sorta is the camp with Buzz. My mom didn’t have cash to help with tuition but she did help with money here and there for books, groceries, etc. I realized early on that I needed to excel to get scholarships, student work study, part time job, whatever to get through. I did take out some ungrad loans but they’re really peanuts. I got 2 degrees, worked a few side jobs and think I’m better for it. My MBA on the other hand has really saddled me with student loan debt. :-(

I’ll help my kids with what I can when the time comes but I’m not going start saving now….I gotta pay mine off first

 

[jlmatthew]

Just have your Son apply for the same scholorship that I did called the GI Bill

Thats what I told my oldest boy

 

[Nemont]

Buzz,
I got zero from my folks and spent 6 years in the Army getting my GI bill. I have not taken anything away from my kids or family in the way of doing things with them or spending time together. I never gave them a free ride and all three of them have full time jobs, even my 15 year old stocks parts for a local implement dealer full time in the summer and a couple of hours every night after school.

The facts are that given the costs between what you paid and what it costs now, a kid cannot earn enough swinging a pulaski all summer to pay even one semester at the U of M. They need either saving, borrowing, scholarships or other jobs to make up the difference. I chose to have something put aside to assist. I don't just give it them but knowing that I am not going to have to rob my retirement, home equity or cut back on my hunting time and can still help my kids get a degree is important to me and my wife.

I have no interest or even think it is healthy for parents to pay everything but I do think it is important to be able to keep them in school and on a program by helping. Given the growth in the costs of college you need to be planning before age 5 how much to put away or you will be in the boat with everyone else and sitting on a pile of debt in a down economy.

There is lots to not like about going down the road to college debt, first and foremost is the college debt cannot be discharged even in bankruptcy. So rather than enslave my kids, I started early. Different times call for different measures.

Nemont

 

[JoseCuervo]

My 2 cents....

Just finished my oldest thru her freshman year in college.

Times have changed since I went to college. I used to pay $350 per semester (the first year) and could rent part of an apartment for $150/mo. Happy hour for 20 oz schooners was $0.75..

Me and my friends could pay for college with a collection of part-time jobs, summer jobs, and selling plasma.

Now with the costs of college, I honestly don't think a kid could get thru in 4 years with part time jobs and not have a bunch of debt at the other end.

That being said, I did save up for a college fund for her, invested in equities, and, it grew to enough to pay for school. Then, for some unknown reason, I paid the first year out of my pocket, not her college fund, so she still has her money. I am thinking I am going to be able to keep doing so, eventuallly she will have enough to go to grad school or get started in life.

And as you know, living and learning in Logan is a pretty good bargain.

 

[BuzzH]

Nemont,

I agree except for this:

The facts are that given the costs between what you paid and what it costs now, a kid cannot earn enough swinging a pulaski all summer to pay even one semester at the U of M.

That just aint true...

A gs-3 makes 10.46 an hour straight time...throw in 150 hours of OT, maybe 200 hours of Hazzard pay, which is all but a given.

Is a semester at UM really $13-14,000 for a resident?

 

[Nemont]

Try it on for size. My oldest works for the Corps at Fort Peck. She is paid $15.24 an hour and works 40 hours a week and works from May 15th to about August 15th. Her gross is about $7,363.00 take home is about $6,260.

Just looking back at last year, the fall semester, tuition, books, fees and living cost just under $11,000, that is without a car and just a bike as means of getting around.


Maybe the oil field makes better money or pulaski motors are making far more than the average person but there are hardly any summer jobs that allow a kid to make enough to pay for even one semester .

It is a different world.

Nemont

 

[JoseCuervo]

Speaking of "pulaski motors", I am impressed that nobody has spelled it "collage" in the first 14 posts in this thread.

We will easily do $7k for the first semester, and that is with in-state tuition.

 

[Moosie]

Pointer, I'm starting a Website called DoTheOppositeOfOscar.com

I would NOT invest in the 529's.... There within lies your answer

 

[Nemont]

Nemont,

I agree except for this:

The facts are that given the costs between what you paid and what it costs now, a kid cannot earn enough swinging a pulaski all summer to pay even one semester at the U of M.

That just aint true...

A gs-3 makes 10.46 an hour straight time...throw in 150 hours of OT, maybe 200 hours of Hazzard pay, which is all but a given.

Is a semester at UM really $13-14,000 for a resident?

How many kids are making $13,000 a summer? I can tell you that the VAST majority right now are happy to just have a job. How much OT and hazard pay are guaranteed? Not saying you wouldn't make what you are saying but I am telling you that for most kids it just is not happening the way you think it is. It is not the same game as when you were going to school.

I am going to ask my neighbor what his kid makes, I know last year he made less as a fire fighter than mine did giving tours of the interpretive center.

I have nothing against hard work but affording college or "collage" is not the same as it was even 10 years ago.

Nemont

 

[Papa-Zulu]

I spent three years in the Marine Corps, got a B.A. in journalism and English through the G.I. Bill. My daughter entered the ROTC program with the Army, had a choice of 42 colleges she could attend, chose Creighton U. in Omaha and got her nursing degree and a Commission to 1st Lt. in the U.S. Army. Spent four years in the Army, including nine months in Afghanistan as an operating room nurse. Left the Army as a captain. No debt for her. No debt for me. I read not long ago, however, that 75% of military age Americans are unfit for military service due to pathetic physical condition, drug problems and/or criminal history. So it certainly is not for everyone.

 

[BuzzH]

Nemont,

I'll concede the point that its a bit different now, still doable for those with a work ethic.

In 1988 I worked 3 months and maybe 2 weeks...my base salary as a gs-3 was 5.77/hour. I made $9,800 with 3 days off total in that time frame. My longest stretch of consecutive days of work was 36.

At a current base of double what my wage was in '88, I'd probably rake in closer to 20-22K today for the same number of hours I worked in 1988.

Another option would be to work 6-7 months and go to school for one semester a year (which I did for the last 4 semesters I went).

It isnt like most college grads have a job waiting for them, so I dont see the rush to get through school.

 

[birddog32]

Oldest daughter went to UW Green Bay for 4 years. Went to Baylor for masters. After 2 years and over $20000 in debt, commissioned in Air Force as 2nd LT. Uncle Sam picked up whole tab and paid for her to finish masters and get Doctorate. Now being promoted to LT Col and making more than my wife and I combined. Will do her 20years and retire from military. Can be done but a person has to be focused and know what they want.