Maybe I shouldn't be shocked by this, but I am. I am finally doing the research to set up 529 plans for the twins (I know... I've been a bad, bad parent), and I decided to plug some numbers into an online calculator that estimates what the cost of college tuition will be in 15 years when the twins would most likely be enrolling. I used my school (a private, liberal arts college) as a starting point (as that's the most expensive option, I wanted to start there.) The result? If the calculations are correct in estimating the rising costs of college education, we will be paying upwards of $700,000 *per child* for the twins' college expenses. That's 1.5 million dollars.
Excuse me while I have a heart attack!
And, lest you think that my husband's public university education would be much cheaper, surprisingly, it isn't as big of a difference as one might think. Especially if you're paying out of state tuition.
So, I need some advice. What college savings plans do you like the best? I don't even know what I should be looking for. Help!
10 comments:
OK g/f, I have some insight into this with 2 in college and a 21 month old! We use our state's 529 plan. I posted a response to a MN person's question on the same issue, which I will copy and paste here (less the MN specifics).
I opened a WI Edvest Account - it's a 529 plan and has a benefit of WI state tax deduction and not federally taxed, so I pay ALL of the college expenses through Edvest(wiping my brow at the mere utterance as spring tuition got paid yesterday). Here is your Illinois version: https://www.brightstartsavings.com/OFI529/PN/generated/en_us/PrimaryNavigation_07-07-08-133023.xml
I do the investing monthly through an automatic deposit - it's super easy. I have a separate fund for each child; that's the way they work. I have found that "redeeming" funds for tuition, books, housing, misc has been a piece of cake. I do it all online - no fees for broker assistance of any sort. (I do have a financial person, she's totally supportive of doing a 529 solo to avoid fees of one managed through a broker - the trade off is that state managed 529's don't have a lot of options for investing - but they do have the basics, and i'm not out to beat the averages of the 'market'.)
Edvest does not have a lot of options for investment, so it's pretty straight forward. My one big piece of advice is when the kids are close to college (sophomores in HS) you MUST move your investment into a safe (bond) fund so that gains are not suddenly LOST with a market move - I am so so so thankful I knew this and avoided a HUGE loss these past few years. I had moved my college aged kids money to a conservative fund about 3 years before they went to college.
You can get some basic info about the value of 529's here: http://www.savingforcollege.com/college_savings_101/
and here is a pretty readable one too: http://www.cbsnews.com/stories/2009/10/01/earlyshow/contributors/raymartin/main5356031.shtml
A 529 is not the only way to save for college. You might read about folks using a ROTH IRA for college. I haven't ever found good evidence that this strategy would work for our family situation. Personally, I'm gonna need my Roth - old momma that I am!
Lots of info here - but I'll end by saying I started LeLe's account when he arrived home. I now have 4 529's! Aria, my oldest, is a junior in college and I still put a monthly deposit in there because it's going to be a stretch to get her tuition paid. Devin is a freshman and I do the same for her - so savings still is happening though they are IN college. Plus, spending the money for college out of (through) Edvest had very clear tax benefits.
One more comment: I have one kid at a private 43K a year college and one at the state university. The biggie #1 got SO SO MANY scholarships that we pay about 10K a year for her private college (Beloit College). Her scholarships are not because she's a super smarty pants, but because she's the coolest kid and her application showed that off beautifully (she got a univ. presidential scholarship awarded for merit - we don't qualify for any need). Daughter #2 (UW-Madison) is a super duper smarty pants and got no award of any sort (and got into Northwestern and Wash U where she was offered NOT A DIME to attend)...her tuition is about $16K a year presently. She'll be applying for outside money/scholarship on the chance that her super smarty smarts and very interesting volunteer work will get someone's eye and provide some merit award.
I guess I'm being so descriptive to communicate that it is SO HARD to know what sort of recruiting our kids will get - and how that will influence decisions.
Now we're in the throws of helping biggie boy search for colleges - and totally understanding that he can shoot for the stars and we'll lay out the "offers" when they come in. (He is doing a very cool volunteer project this summer, so his college application will have a special "spin" depending on how the teen transformation from rural S America goes!).
I'm writing a book: we DON'T promote the volunteering for the purpose of college, we do it as part of our family promise to work for social justice .... but but but....we are SURE the program is part of what makes the kids special just as they are on the cusp of college.
So, yes, save like crazy for college, but also tend to important life experiences because they too are part of, you know, the journey.
Questions? Seems like I'm willing to divulge ALL.
we opened college mutual funds for c and l, but haven't started one for z because the market has been so bad. currently we're putting money into a money market account for lack of anything else. my dream would be for the kids to have a liberal arts, small private college experience... but we'll see if that happens based on the cost of tuition. david and i just talked more about this over the past few days--the pros and cons of setting aside a lot now versus vacationing now (while our kids are young and we want those family experiences) and using home equtiy or me working full time later and using that money to help pay for college. I DON'T KNOW!!!!! it would be foolish for us to set aside nothing, but with the rising cost of college, i am resiging myself to the fact that we will never catch up, especially with 3 kids. we'll save what we can (we have funds with Vanguard) and then hope and pray for lots of scholarships. i read of a family that told their high school senior that their summer job was to research and apply for every single scholarship they qualified for. it worked... they wound up getting 78% of their tuition taken care of.
You are awesome! Thank you, thank you, thank you!
At this point, we're evaluating whether to start 529's with Bright Start in Illinois, or to go with USAA, who seems to be at the top of the list on the Saving for College website, and whom we bank with already. I like that we can also include contributions from Upromise which we're already enrolled in but don't really utilize yet... Plus we're generally very happy with USAA.
My problem is that I understand exactly nothing about investments, and I generally run screaming from any discussions. But I also know how important this is, and we've neglected it for far too long!
Also, you bring up such great points about the myth of private education being so much more expensive than public. On paper it may appear that way, but when it comes down to it, many, if not most, private school students get huge tuition deductions straight from the school. Those opportunities just aren't as available to public university students.
I was shocked to learn that an out of state student at U of I (where Jon went) is actually likely to pay more than a student at Colorado College (where I went), all things considered. It's mind-boggling.
Thanks again for your insights. They are incredibly valuable!
Also, I should say that I think there's a big difference between Private liberal arts Colleges like CC & Beloit, and private research institutions like Northwestern and WashU.
I had the benefit of seeing the way that all three types of schools operate. I went to the University of Missouri (public state school), then transferred to Colorado College (private liberal arts) and went to grad school at the University of Chicago (private research institution). The differences are fascinating, and I firmly believe that certain students will do really well at each type of school, while other students won't have the opportunities to reach their full potential.
It's highly unlikely that we'll have 1.5 million dollars saved by the time the twins go to college (unless I somehow win the lottery that I don't play). However, I definitely don't want my children to be limited in their choice of college based upon money. This has been a nice reminder that things are not always what they seem.
Lots of good food for thought here...
Jayme, I'd be happy to talk with you (offline) about what I know about investing. My immediate economic family history is pretty impoverished - so I didn't learn about money from my folks. When I married a doc in my 20's I fully recognized we'd have money to live a nice life and I'd better damn well learn about money, because all I knew was that my mom regularly bounced checks and that my paper route money helped keep the heat on.
I am not a financial person, no formal training, but lots and lots of practice(and when I was single it totally PAID OFF!). I was part of an investment club for 10 years and so forth....so I'm happy to talk about this.
I think this is the sort of thing we 'hord' too too much as private information- what we know, our experiences, how we learned, mistakes, triumphs. So, I'm pretty open about this stuff as a model for healthy financial 'talk.'
okay, one more thing and I'll shut up!
I honestly believe that vacations are an investment in my children's future.
That might seem odd at first glance, and in no way am I advocating for spending a ton of money on vacations to the exclusion of other types of savings / investments. However, taking kids out of the "bubble" of their everyday lives offers them opportunities that they'd be hard pressed to find elsewhere.
I specifically think that traveling internationally with children has remarkable potential for preparing them to be conscious, informed, and diplomatic participants in an increasingly global economy. And I don't think travel should necessarily be limited to vacationing. (We're hoping to do international service trips with the kids as soon as they're reasonably old enough).
I also think that having those sorts of experiences will make them more desirable to colleges, and thus, more likely to receive scholarships, but perhaps I'm just dreaming there!
I could go on and on, but maybe that's another entry...
Meghan, I absolutely agree. I don't think we talk enough about financial stuff, and I think that it would be a really good thing if we started being more open about it.
My personal history is the exact opposite of yours: I grew up with money. It was never discussed -- things just appeared. My parents paid cash, out of pocket, full tuition for my college education. I never applied for any scholarships (and wouldn't have gotten them anyway with my abysmal high school performance) and had no clue what a fafsa was.
It was an absolutely ridiculous situation, and I'm very frustrated with the way that my parents approached money. I've since had to do a lot of learning about responsible financial planning, and definitely don't want to make the same mistakes that my parents did with my children.
I should also say that while I'd love to provide as much as possible for my childrens' college educations, I am under no delusion that we'll be able to pay for it all. They will apply for scholarships, and, if necessary, they will get loans. For me, it's all about balance.
Thanks again for the discussion, ladies.
Although I didn't like it at the time, in hindsight I appreciate what my parents did for me. They helped with living expenses, but I was on my own for school fees and the remainder of my living expenses. It was hard, but I know now that I worked harder and faster than I otherwise would have because of it. But, it was much less expensive back then relative to what an unskilled student could earn, so I know I am going to have to step up my contribution to make it even possible for my two to do what I did without loans.
I do have a 529 plan going, although it will only cover one semester for one kid right now. Will be able to funnel more once the current outlay for their education (aka childcare) goes by the wayside. Giddy at the thought! I plan on splitting the freed up funds between education within walls (college) and without walls (travel, etc.).
And then there is the matter of my own retirement. Oy vey...
I'm giving a total ^5 to the importance of travel/experience and shaping lives and hearts. Especially for our transcultural kids. Our first "big" adventure was to Kenya when Dev and Ar were 4and 6 (we left Teague home as he was 2.5). We visited my friend for her wedding in a village in the Rift Valley. It was most certainly TRANSFORMING for my young daughters. When these same girls were 11 and 13 they saved their OWN money for a year and traveled to Hungary BY THEMSELVES to stay with Hungarian friends they made as elementary students. They lived there outside of Budapest with the most amazing family for a month....I could go on and on and on... I can't say enough about the boy who became a young man on our trip to Ethiopia. And now he's heading off to 'do' NGO work this summer. While we can plot and plan for college, there is a whole life to be lived, and I gotta just chime in that we're all talkin' the same talk. How cool is that?
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