I’m just curious if you have any advice on starting college funds for kids. I have two boys (nearly 5 and 2), and we are most likely going to be putting them in Christian school. How can we afford to put them in Christian school (which in our area is around $4,000 a year for elementary) and save for college. Do you think it’s a parent’s responsibility to pay for college? I know starting now will help with compounded interest, etc. but our monthly contribution will be quite small. I’m just wondering what advice you have for this major financial goal! -Angela
To answer your question directly, you really need to set priorities. If it is more important for your child to get an education at a Christian school now in elementary school then, say, go to an expensive college after he or she graduates, then you save for the elementary education and pray he or she receives scholarships and has great summer or part-time jobs to supplement and get by. It has been done many times and can be a great learning and character building experience.
You can always save what you can for college, but do not guilt yourself (or let others guilt you) into thinking you need to do more if you are doing all you can and you are setting your priorities as you feel led to do.
Besides saving for one’s house, saving for a child’s college is probably the most costly expense a family will face. And to many, not going to college is simply not an option. Because this is such an important aspect of a family’s financial plan, both Congress and state legislatures have set up special savings arrangements just for educational expenses. I am just now in the process of looking into these options for our children.
I believe that parents should help out if they can, but the child should also seek to help offset the costs of college whether it be through their accumulated savings, through working through college, through scholarships or through a combination of some of all these things. We’ve decided we do not want to be “boxed in” to only using any savings that we may accumulate for college or vocational training expenses as we want to have the option for the savings to also be able to be used for small business development or for a down payment on a house.
Because of this, we are looking into opening what is known in our state as a Uniform Transfers to Minors Act custodial account. In this account, any money saved is actually considered to be an asset of the minor child and we, as the parents, are merely custodians of the money for the child. Once the child reaches the age of majority, here 21, he or she will then receive the full account.
This has its drawbacks, as we do not know if that child will be mature or wise enough to handle anything coming their way, but by that time they will be adults and will be responsible for their own actions. It is my responsibility now while they are young to teach them and put them in the position where they will be wise stewards once that time arrives.
The other drawback to these accounts is that they are not treated as favorably for tax purposes as, say, Educational Savings Accounts or 529 plans. Nonetheless, that is the price you pay for flexibility.
As I said, there are several other options available for qualified educational expenses (see this link for what constitutes such an expense). These include the individual state-sponsored 529 college savings plans, the pre-paid 529 plans and the Coverdell Educational Savings Accounts (ESA).
From my research, anyone can open a 529 plan, regardless of income. There are even some 529 plans that allow residents from another state to participate in them. It is my understanding that the plan is preset in terms of diversification of investments to track the age of the child and to change investment holdings to get more conservative as the child gets older. With a Coverdell ESA (at least for 2011) you can save up to $2,000 per year per child pre-tax if you make less than $220,000 married filing jointly and any unused balances may be used by eligible siblings. This is definitely a good option if you have little ones and time on your side.
This is only meant to scrape the surface on these accounts. I am sure that many of you out there have already researched these out thoroughly and can explain some of the actual nuts and bolts of how the accounts work from personal experience. I would be interested in hearing what has worked for you. If you had to do things all over again, would you do the same thing?
Jesse Paine is a licensed attorney who owns his own law firm. He’s married to Crystal and is the numbers nerd of the MoneySavingMom.com team! If you have a question you’d like him to answer in a future column, you can submit it here.
The content of this column intended for informational use only and is not to be construed as providing legal, investing, accounting or other professional advice. Your situation is factually specific and you should accordingly seek qualified professional counsel concerning your specific legal, investing or accounting needs.
Ashley says
I just graduated from an out-of-state Christian College in May 2010 and am so thankful to have graduated debt free (all glory to God!). My college expenses rested fully on my shoulders and I worked every year at college as well as every summer and winter break. I cannot express enough how that responsibility matured me financially. I learned quickly the difference between needs and wants. I also learned to take my studies more seriously.
There were times when I didn’t have the funds to pay my bill but the Lord ALWAYS provided. This stretched my faith in so many ways. As my husband and I prepare to go to the mission field, I will have those wonderful reminders that He will take care of me on the mission field just as in college.
I must put a plug in for the wonderful Christian College I graduated from, especially for those with high-schoolers that are concerned about finances. I attended Pensacola Christian College in Pensacola, FL where the current tuition is only $7,500 for tuition, room, and board (in-state OR out-of-state) for an entire YEAR. Also, seniors in high school this year can get a scholarship which will give them their senior year in college FREE.
But whereever the Lord leads your child, just remember “Where God guides, He provides.”
Crystal says
What a fabulous testimony! I’d love to have you do an “I Paid Cash” testimonial on what you learned and how you managed to pay cash for a private Christian college if you’d be interested. Submission details are here: https://moneysavingmom.com/share-your-we-paid-cash-stories
Lori B. says
I don’t think this idea was mentioned yet, but how about looking into Christian Homeschooling? My husband and I both realized we couldn’t pay for Christian school AND college, so we opted to teach our kids at home so they could learn our values while getting an excellent education. Now we will be able to start them off with at least SOME money for college. (We are not expecting to be able to pay for it all, but my parents paid for my first year and we hope to do at least that for our kids.) I personally got a 3 year scholarship, and so came out of college with no debt. My husband however, took longer to get his degree and had loans not only to the government, but also to his parents that he had to pay back! This was a constant source of stress on our finances, until we learned how to pay off our credit cards, car loans etc. more quickly by putting more on one payment each month until it was paid off. Finally we were able to pay off the school loans and it felt SOOOOOO good! 😀 But we were only able to do that because my husband had steady work and good pay. In today’s economy, those things are no longer guaranteed! So, please consider reading at least ONE homeschooling book before you make your schooling choice. I went to public school my entire childhood, but have now been homeschooling successfully for 6 years. Homeschoolers are now even sought after by colleges. Food for thought! God bless, Lori in NY 😉
vicki says
i don’t think parents *should* pay for college, but they should definitely contribute in some way. i am in my first year of college and while I’m paying the bulk by taking out loans, my parents took out a loan so i could live on campus the first year…
now that being said, my grades are MUCH higher than my fellow classmates whose parents are paying for everything. while they’re out partying on Thursday nights, I’m studying for my exams because it is MY money i am spending here and i want to get the best education possible for it.
most of the kids whose parents are paying for college don’t care about getting jobs or working hard to get scholarships.
NOTE TO PARENTS: make sure your child lives on campus the first year! it is essential to getting adjusting and fitting in. i know many commuter students who feel so out of place at my college. my first year at college has been great and i couldn’t imagine how this year would have gone if i didn’t live on campus. you have so many opportunities and new friends. it also gives you a sense of freedom and being on your own. if you raise a great kid, they’ll have no problem being on their own.. no matter the cost, my parents said they would pay for me to live on campus my first year. please do the same for yours 🙂
Kristine says
We plan to pay for college but our rule is that if you flunk out the first semester, then you pay the rest yourself.
Janet says
First of all when did college become a right? I realize I’m old (in my 40’s) but I put myself through college- mommy and daddy did not pay for it. Also, what does a college degree get you these days anyway besides debt, a piece of paper, and probably no job. I’d much rather see my daughter go to a trade school or medical assisting or even beauty school- so she can get a job right away!
Tiffany says
One resource for getting through college financing is working AT the college that you are attending!
Most schools will offer at least half tuition waiver for their full time staff and at least a 3 credit waiver for their part time staff each semester.
When I graduated from high school my parents could not afford to help me with college, but I also did not want to be burdened with student loans (especially since I didn’t know what I want to do in college!) I found out that the University in my area offered tuition waivers for their staff, so I worked hard to find a part time job on campus. They paid for one class each semester for me, the rest I paid with the money I made working. After a couple of years I was able to be promoted to full time staff and now my tuition is 100% free! The majority of my husbands tuition is waived as well, and if we had children they would get to go to school for almost free!
I highly encourage people to look for jobs on the campus that they attend!
Kristine says
Adding to this, I do think it is a child’s responsibility to look for scholarships.
Nicole says
And fill them out themselves! You would not believe then number of local-level (school and town-wide) scholarship applications I read that are not only typed by the parents, but written by the parents. It makes me crazy! I never pick those applications no matter how good they or the students are. (Yes, I realize this has little to do with the topic at hand.)
Jessica says
Interesting! Love it. Maybe next weeks question should be:
Does anyone know how Financial Aid is calculated?
That seems to be the real unknown!!
Kristine says
I’ve never understood why people think their children should pay for their own college. When one has a child, you provide them with necessities- food, clothing, shelter, healthcare, etc. We also pay to educated them whether that is through homeschooling or taxes to fund public education. Why do we feel the responsiblity of education ends in high school? Just because college is a cost, isn’t it still a responsibility of a parent to make sure their child recieves an education? I think a child should work for thinks that are “extra” but not for necessities. If a child wants expensive jeans or the latest shoes, that is an “extra”, but an education is not.
Michelle says
A note for Angela, the author of the question:
The ESA account can be used for ANY education expenses at ANY time (and, therefore, for your child’s private elementary school). This may be an excellent way to get a tax break on your tuition.
The 529 plans must be used for higher education expenses.
JoannaTopazT says
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We have a 529 (in my name, with our daughter as the beneficiary), and I wanted to clarify this: the “age-targeted” funds are an option within the 529 investement options — much like the “retirement date” funds within a 401k – but it is not the only investment option. You can invest in any state’s 529 without being a resident; however, we chose Minnesota’s, where we live, in part because there is an annual matching grant (on a sliding scale of how much they match, depending on contributions made over the previous year and family income) that only people who actually live in Minnesota are eligible for.
laurie says
I completely agree with Rick in his post. Any money put into account with your child’s name will count against you for financial aid. I decided not to do a 529 plan nor an utma. My DD who is 7 has a nice amount of money saved for college that I contribute to monthly,but as she nears high school I will be clearing this account out along with my emergecny fund money and put it in a safety deposit box at a local bank. I think for financial aid or grants in our state they look back 5 yrs into accts. Since I am a single mom with 2 girls and make a very middle class income my hope is that most of college will be paid for. Like others have said it is more important to fund your roth ira and pay off the mortgage. If I can get my mortgage paid off by the time my oldest is in college than that money will go towards helping both girls get through college. In the end it will all work out. It is nice to be debt free at such a young age with only a mortgage left at age of 39.
Mary says
My experience is that income will count against you in the financial aid process far more than savings. We have 529s for both our children, including one who applied to college, and I would say that income is the bigger factor. Some colleges will also look at property (one of the schools she applied to apparently did), but most don’t seem to do that anymore.
Danielle says
We’ve started 529 plans for each of our 3 children, through another state’s plan. My uncle recommended it–he’s a broker and it was what he was funding for his grandkids. We will not be able to fully fund our children’s college education, and what we are now contributing may decrease, as our family is still growing (one in the oven as we speak!); so, contrary to what my parents did, we will expect the kids to save money as well. One way I plan to do this is by giving the children an allowance that will be divided up into 3 categories: tithe, short-term savings, long-term saving (i.e. college). My children are young (1, 2 & 3 years old), so when they first begin earning an allowance, their contributions will be tiny. But if I start these habits early, they will hopefully stick. Then, when they are old enough for work outside the home, they will hopefully carry on this pattern to save even larger amounts toward college. If they choose not to attend college, the 529 we have can be used for another child, and their personal savings will be theirs for whatever use they see fit.
Su says
I love that part of their allowance goes for their tithe! Great idea, we give our daughter money for the offering plate but it’s not her money. Love it!
Su says
It might only be little things but it’s gonna help to add up in the end. Our daughter is 3 and I want her to understand the value of a dollar. I’ve devised a plan to have her collect cans from us and her grandparents and sell pecans from our trees. We’ve already decided that most us it will go into her savings account and a small amount will be given to her to spend. She also receives all of our change minus the quarters that’s to be deposited in savings. Her great-grandma has been buying her savings bonds since she was born for birthday and Christmas for her future. Lots of little things that going to eventually add up. Is it going to pay 100% for college, no way, but it’s gonna help!
Crystal says
Love this! Our girls are collecting cans, too, so that they can “make money to put in the bank”, as they say. 🙂
Amy says
We set up 529 plans for our children – ages 5 and 1. We picked the Virginia plan because of it’s low fees and return rates. We do not live in Virginia however. The 5 year old’s plan is nearly funded – for a public university. We will add the last contribution this year and then monitor it and add later if needed. She hasn’t even started kindergarten. The 1 year old has actually has more than his sister did at this point. The market was in the toilet when we started his – and ended up getting more bang for our buck. His should be funded by age 4.
We are not rich. We are very middle class. We did not fund the 529 plans at the expense of our retirement – rather in addition to. We contribute to both and live within our means with no debt other than our house. When we get a windfall like a bonus or a tax refund, we have allocated these monies for retirement and college funds. We don’t have to go back and pay off credit cards or anything else because we lived within our means throughout the year. We don’t get these windfalls every year but make regular contributions as well as deposit birthday and Christmas monies.
My parents helped me graduate debt free but expected me to contribute and work as well. Which I did – working even three jobs at once. I always knew that it was a struggle and didn’t blow money like I saw my friends with loans doing. I want to be able to help my children and with proper planning I can. When the time comes, they will be expected to help and do their part – to have ownership too. I never anticipated that I would have accomplished what we have thus far.
A.S. says
Beautifully said.
My husband and I are doing the same thing. Both of our parents saved for us for college and started saving when we were born, and we both graduated nearly debt free. The expectation was to provide the same for our children, which we will. We are also very middle class, fund our retirement, and will also fund our kids’ college funds (I am PG with my 1st). I was just looking into this yesterday, so it was an amazing coincidence to read the question this morning. We are planning on picking Utah’s plan for the same reason (low fees), though we live in MA. Living within/much less than our means, which is what both of our parents did, will allow us to pass the same mentality to our children. My husband and I wouldn’t be where we are without the generosity of our parents, and we look forward to continuing that.
Amy says
Good luck! You are smart to prepare now. I am glad we started early. It has given us more options knowing that we have a handle on those expenses. Our daughter goes to a private christian school – which I love. Although there is a good public school around the corner. I however worry that she would get lost in the crowd. Having future school expenses taken care of has allowed me the luxury of selecting the best fit for her. Don’t get me wrong, it’s still a struggle. But one that I feel deeply about – I am happy to make the sacrifices that we do.
We too were blessed by the generosity of our parents – and have made life choices to be able to do the same for our children.
Heather says
A few things we have found to be quite helpful ……..they involve reducing the amount of years your child will need to attend college
Have your child take advantage of AP classes where they have the option of taking an exam to earn college credits. The “exams” cost a little but in reality are pennies on the dollar compared to what you would pay for the credit courses
Have your child take classes over the summer (while still in High School or even the first year or two college) at your local community college. Again, the price per credit is so much cheaper.
My son is a Junior in High School this year but has already earned nine college credits. We are hoping to knock off many of the basic requirements before he goes to college so he may only need to go three years instead of four.
Nicole says
We found (“we” being my family and the students I now teach) that there’s a LOT of thinking and planning that needs to go into taking dual credit classes. It’s really only a good deal if your kid is fairly certain about his/her major and college. Transfering dual credit classes is tough. And both DC and AP credit might not be accepted for anything more than elective credit, if at all. $80/credit hour or $100/test are great rates, but only if they end up helping where you think they should.
Plus, being placed into higher level college classes as a first-year college kid can be quite a shock. I’ve seen valedictorians go into college as sophomores and end up having to repeat classes or watching their GPA suffer because they just weren’t ready for a 200 or 300 level class their first semsester.
Just one more thing to weigh against the savings thing.
Savvy Student Shopper! says
Make sure to check which of those credits his future college and major requirements will accept!
Many people rack up college credits in high school and realize they aren’t applicable for their college/major. So just make sure what you’re spending your money on now isn’t going to be a waste. All schools are different though, but it’s worth checking out.
Susan says
Here in San Antonio, high school students have the opportunity to take community college courses as dual credit for high school courses. What’s more, tuition for dual credit courses is FREE for high school students, and this option is available to private school and homeschool students as well as to public school students. Of course, the student and family are responsible for transportation to class and for course materials, but what a great opportunity! Some of these courses are available at high school campuses on the weekend or in the evening, and textbooks are readily available on Craigslist, half.com, abebooks.com, or as rentals from Chegg. Check your local community college website to find out whether a similar program is available in your area.
vicki says
in MA, we have a similar program. i took anatomy the summer before my senior year.. i spent over $400 on books because they had to be the “new” edition. only to learn that the credits cant be transferred to my college because of my major. i am a pre-pharmacy major and my college requires you to take all of your courses at this college… so i get to retake the class next fall.
Jenna says
My son graduated high school and had also completed two years of college level courses. Using the methods you talk about above. While he choose to go all four years to under grad and has gone on to grad school as well the college experience and the AP course got him over $400k in scholarship for all of his college! He has not a penny of debt yet and he graduates this spring.
Jo says
I am currently working on my Ph.D. in Higher Education and I’m taking a class on Higher Ed Finances this semester. What I have learned about our current financial aid system is as follows: While a 529 plan might be nice now, once your child fills out a FAFSA to apply for grants and scholarships for college, he/she will be penalized for having the 529 plan. If your income and financial circumstances would have allowed your child to get a grant, just having a 529 plan will take away the grant money and your child will only be offered loans. This is very counter-intuitive, but I went from strongly believing that I needed to start a college fund for my 2 year old to strongly believing I need to pay the mortgage off early and just offer my child cash as needed to help so he can get the grants and college scholarships others in a similar situation would be able to get.
Emily says
Is that if the 529 plan is in the child’s name? Or does it not matter whose name the 529 plan is in, it just counts against the child?
Jo says
If the plan is in the child’s name, it is penalized by 50%. If it is in the parent’s holdings, it is penalized by 30%.
Emily says
Thanks!
Jess says
Do you know if saving money for college in a regular ol’ mutual fund triggers a penalty for FAFSA?
Sarah says
This is great advice! As an Army family, funds are limited but we do really need to start thinking about college. Our oldest is already 7.
Jennifer says
I have a son who will be attending college this fall. We have no “college savings plan” in place. He is currently working and saving almost all his money after tithe. He is very proud of the amount he has accumulated. We will be helping with what we can, but he will be responsible for the bulk of it. He will also be working on campus where he will hopefully be able to earn about 1/2 of the tuition/room and board. We will do our best to make sure he graduates with no loan debt. He is attending a modestly priced christian college who has this goal for all of their students. College/training school can be accomplished with no college funds for the child, but they will have to work! We personally do not think this is a bad idea. If we had extra money we would love to have funds set up for our children. It is just not a possibility right now.
Sylvia says
I may be alone on this one, but I was almost offended by the bolded line “the lion’s share of the expense should rest with the child, whether it be through their accumulated savings or through scholarships, or both.”
The word “should” was what really bothered me. I completely agree that one should not feel guilty if they are unable to do so. However I felt like this article was putting down those who choose to pay for their child’s education instead of having the expenses “resting with the child”
Tina says
I feel this article is simply Jesse and Crystal’s opinion and what they choose to do. The article was not intended to insult anyone or impose their beliefs on anyone, take what you like and leave the rest! They are doing a great job!
Jesse says
Tina is right, this is just my opinion and should not be taken as the be all and end all. After all, this opinion very well might change in the future. I am by no means saying that those who pay for their own child’s college are wrong for doing so. If you are in a position to do so, great. You are placing them in a better position to be financially independent.
However, I think it is good to put some onus on the child, whether that is financially or performance-driven, so they do not loaf off at school and expect mom and dad to fit the bill. I’m really glad that I was responsible for paying for my undergraduate education as I feel like it helped me to take more responsibility and ownership of my education. That said, I’m very thankful for the money my dad had saved after my mom’s death which paid for my law school education. I know we would not be in the position we are financially today but for his generous help.
Thanks for showing the need for clarification!
Emily says
I’m so glad that this topic has come up. My husband and I have been struggling with this decision for our own two young children. While we want to help them out later in life for college or whatever it is they choose to do (as long as it’s responsible, or course), money is very tight and I feel that contributing money into a fund to hand to my child in 18 years isn’t a smart choice. My parents did not have a college fund for me and I actually think, for me, it was a good thing. I learned very quickly that if I wanted to go to college (and I was told I HAD to go), I had to have great grades for scholarships and my money from part time jobs went into a savings account for my education. I worked through most of my 4 years of college to pay my own living expenses and some tuition (although I DID have to take out a few student loans). I think it really helped me to mature and accept responsibility at an age where many of my friends were partying or blowing their parent’s money on whatever they wanted. I agree with many of the posts here. It’s more important to put money towards paying down debt and retirement. If you have any left, I think an education fund is fine. But I also think that if a child grows up with the expectation that THEY will be responsible for their future education, it will give them a leg up in making mature financial decisions for themselves. It’s a lot to think about.
Nicole says
Every month when we write those checks for my 32-year old husband’s undergraduate loans, I want to kiss my parents’ feet for doing everything they could to get all three of their kids through college without taking out loans. We’re doing as much as we can to put our kids (now 5 years and 13 months) in the same position.
College will not be optional for them. Harsh? Maybe. But that’s what we’ve decided. And because of that, we need to foot at least some of the bill and we’re using my parents as models. (For the record, we went to public schools.)
1. Studies come first. My sisters and I all scored in the 30s+ on our ACTs. That = big bucks in scholarships. When I graduated in IL, the top 10% of the class could go to an in-state school for free or almost free for a few years. In MO, the A+ program rewards good grades/attendance/community service with 2 years free at a community college/tech school. Many states have some similar incentive.
The deal with my parents was they’d continue to pay for college if we earned and kept X dollars in scholarships.
As a teacher myself, I cannot stress how much of a difference instilling this idea that producing in school will benefit kids in this arena later on.
2. Extra-curriculars come second. My sister ended up getting paid to go to college in large part due to a cheerleading scholarship.
3. Work comes third. We had a deal with our parents that we didn’t work during the school year, but we worked our tails off during the summers and banked it all for college. Working while in college was up to us.
4. Our parents had accounts for each of us and faithfully contributed to them every month. When they started, it was $50/month, because that’s all their budget allowed. They invested wisely. By the time we went to college, our income was too high to qualify for financial aid. Scholarships were it.
5. So.many.scholarships. We started researching them my sophomore year and I probably applied for 75 or so. Even the military commisary offers a scholarship.
6. We have started aggressive 529s for both kids. Automatic withdrawl every month of less than $100/kid. If they get large monetary gifts, all but $20 or so goes in there as well.
7. My grandmother and my mother-in-law have stopped giving junky gifts and now give savings bonds or deposit into their 529s as gifts.
Savvy Student Shopper! says
Great advice!
But I can’t say I agree with your first suggestion. It’s terribly unfortunate nowadays. I just graduated last year, and out of the top 10% of my class, maybe 2(out of 40-50) of them got enough scholarship to get them through college. Having a high GPA, ACT/SAT, and being involved isn’t what gets you the money anymore, unless you are a complete genius, or lucky.
Unfortunately, I’ve found that most of the money from scholarships goes towards athletics and minorities. Being a straight A student got me nothing! Parents, please don’t count on your child’s studies getting them a full ride, it doesn’t happen like that anymore!
vicki says
i totally agree. i graduated this past year. i had well above average SAT scores, a 97 GPA, i was cheer captain, held a part-time job, was editorial staff for yearbook, NHS member, lots of community service, and did an internship my senior year….
my scholarships… $500 city sponsored one. however i did get a $15,000/yr for 4 years from my college… but that barely puts a dent in the bill…..
Meredith Phillips says
Any particular reason college is mandatory for your kids? I will assume my kids will go to college, but what if they’re interested in a profession that doesn’t require it? Why go and waste the money? My dad was a phone tech for Verizon for 30 years and he got a great retirement package when he left the company about 10 years ago. He didn’t need the degree he has and is doing just fine.
Also, what if your kids aren’t able to get the top grades in school? I was a good student, worked hard, completed everything to the best of my ability, etc. in high school and I graduated with a 3.4 GPA. Not bad, but not good enough to be in any type of top % of the class.
B says
I paid 100% of all my tution to an out-of-state Christian College. I got some scholarships but they didn’t cover the big portion of it. I had to get a small loan and I worked 3 jobs while pulling a 21 hr. credit load. It wasn’t easy but it taught me a great work ethic. I was able to pay it off the loan 5yrs. early, YAY!
I have several friends that their parents paid for everything. Most of them aren’t great money managers today and several have really poor work ethics.
There are times I wish my parents would have been more supportive/helpful but I made the best of what I had.
Nora@ The Dollar Hollering Homemaker says
I too, worked three jobs to put myself through school. Still ended up with a bunch of student loans. I had zero help from anyone in my family and I was a 1st generation college student so I had to figure everything out on my own. I think that my experience made me a better student and person.
When it comes to our children, we don’t intend to fully finance their education. Instead we plan to encourage them to work hard, and pay for college themselves. I don’t want them to take out student loans so hopefully, we will be able to guide them through saving for their education.
NV says
My parents paid for all of my college with student loans. Yes you heard me. They took out the loans and they repaid them. They also paid all of my living expenses. Just because I didn’t have to pay for it, doesn’t mean I don’t appreciate it and I have no work ethic. In fact, I have a pretty good work ethic. No they didn’t save for it in advance, but this is the way my parents chose to finance my education and they paid the loans off in the ten years allowed under the standard repayment. My family is not as debt averse as some as my mother and I are both bankers. If no one took out loans, we wouldn’t have a job in the first place.
Rachael says
Some students simply can’t handle working that much and still doing well in school. I’ve seen more than one student glazed over at 9 A.M. classes after having been up all night working. While working can be great for some students, for others, working three jobs can be a recipe for failure.
Kacie says
Oh, and to the woman who had the original question — you should look into Coverdell plans to invest for your children’s education, since you can use the funds for k-12 and also college. Read up on those!
Kacie says
I opened some 529 plans for my kids earlier this year and I wanted to correct a few things I saw in the post and comments.
ALL 529s can be obtained by anyone, no matter their state of residence or which school they would like to attend.
You do NOT have to put your money in a “target date” fund, though some 529s might only offer that option, not all do. I have my accounts set up as “target date” funds for the Indiana plan, but I also had the option to do whatever I wanted with it.
Some states offer a huge incentive for participating in their plans. Indiana residents can get a tax CREDIT of up to $1,000 back on their state taxes if they contribute $5,000 to a 529 that year. Wow!
One commenter mentioned it would be better to max out retirement accounts and then use that money for college if needed. No way! It’s not worth the heavy penalties for doing that. Saving for retirement is more important, but don’t use that for college.
Sherri says
Actually, money in a Roth IRA can be used for education without penalties. Plus, the money can be withdrawn tax-free. The Roth is a wonderful savings tool.
Kacie says
Yes, but you cannot contribute make-up contributions to it…and that can be really costly in retirement! I think the Roth IRA should be used for retirement only, and as “worst-case scenario” savings.
Teresa says
I rhink that person is talking about using a Roth IRA. Contributions can be taken out tax free at any time without penalties. Taking interest out would be penalized before a certain age. Traditional IRAs and other kinds would be penalized as well. I think a Roth could be a great investment vehicle for college savings. Some you can even start with as little as $25/mo.
siobhan says
My parents did pay for me to go to college, and my rent on my apartment. I am obviously so grateful because otherwise I’d be looking at 200k worth of debt right now. However, I still had to work to pay for all of my living expenses, car expenses and anything else I wanted. My mom had to pay to go to college and she hated that because it put so much pressure on her, she didn’t want the same for me. I think it all comes down to what your priorities are. Sure scholarships are great, but you shouldn’t put all your eggs into that or financial aid. I got zero in financial aid, and only $1000 a year in scholarships.
Casey Malone says
We are doing FL prepaid college which is a big expense everymonth ($200 bucks for 2 years junior of community college and 2 yrs university). But you can take them money out (anytime after making 5 payments) if you wish to you just don’t make any interest. I think anything you do is good as long as you aren’t hurting yourself by putting into a 401K or other retirement account. (ie…I don’t think I would put in education if we weren’t able to contribute entire amount that my husband’s company would match.) Also, you can do all you can to teach your kids and sometimes it works and sometimes it doesn’t. I am a very conservative person money and otherwise. I recieved a state scholarship (75%) and a few other scholarships. My parents paid for everything else while I live at home for college. I recieved a few other little scholarships that I could keep as long as they went into savings. I worked two and three jobs throughout college. My bother…not so much. Got a scholarship and went to a college where it wouldn’t even transfer. Even though he could get an identical degree instate where it would have counted. Not finacially savvy.
Casey Malone says
Sorry for the incorrect spellings and grammar…haven’t had coffee yet! LOL!
Lana says
Our college savings plan was to push our 5 kids hard while they were in school. We homeschooled and were able to give tham alot of extra work that is not even offered in public schools in our area. We also maxed out the transcript. Twenty-four credits are required to graduate in our state but we did the maximum of 40. All took 2-4 years of Latin and 6-8 high school level sciences. Four out of five of kids went to college on full scholarships and the fifth one could have of I had known how to play the scholarship game when he went. We were too busy keeping them fed and in shoes to even make a dent in a college savings plan.
Marlene says
We started saving for our daughter’s college education when she was born. We started with some pocket change and moved on to mutual funds and 529 accounts. When it was time for her to start college, we talked Jennifer into starting at a community college which is a lot cheaper. Two years there cost only around $5000. When she transferred to a four year state school it cost $20,000 to finish the last two years. We did not incur any debt. DD then decided to go to graduate school. We told her that she was going to have to fiance that. We are lending her the money and when she starts her career we expect her to pay us back.
NV says
I often wonder if community college is quite the deal it’s made out to be. Most everyone I know that went to 2 years of community college ended up at least an extra year at the 4 year university anyway. That was going to a state community college and then going to the same state’s 4 year college. Everything just did not transfer.
Marlene says
My daughter had a great adviser at her community college. She made sure that all the courses my daughter took would transfer to the 4 year state college. Jennifer did her undergraduate degree in 4 years. I guess it helps to know the requirements for the 4 year school you want to transfer to.
Emily says
I think a lot of it really depends on what the individual’s major is and what degree they are seeking. With my degrees (BS, MS and PhDs in the Biological Sciences), community college was not even an option. There are courses that a person majoring in sciences takes in their first 2 years that can’t be taken at a community college. I would have been way behind if I’d gone to a community college. However, a good friend of mine from high school who is now an elementary school teacher went the community college route for her first 2 years, then transferred to a state university to finish up, and ended up graduating with a 4.0 from the state university and landed a great job (which is hard to do when you’re competing with the other hundreds of elementary school teachers trying for the same job).
Veronica says
We funded 529’s for both children when they were toddlers. With the plan we signed up for, it paid for 2 years of community college (64 credits) in our state (VA) once the plan was funded. It cost less than $20/month for each child. We opted for only the community college plan because we didn’t know what the children would be interested in when they were older and the local community colleges have technical classes as well as regular academics. They are now both in college – ds is studying auto mechanics, so I’m glad we chose community college. The only thing we are having to pay for is books each semester – and gas and parking fees.
Savvy Student Shopper! says
I’m in my first year of college and it’s much harder than I thought to pay for it. While I was in the top of my class and very involved, my scholarships hardly made a dent in my in-state tuition.
If you are a parent planning to send your kid to college one day, start saving as early as possible! Every little bit will help. I went in to college with practically nothing but scholarships, loans and what my parents could afford to pay every month. As my scholarships deplete and interest on loans rise, it’s only going to get more difficult to afford school. Even public, state schools are expensive!
It’s going to be extremely difficult to pay back all my loans after graduating in a few years and I’ll struggle when I’m trying to buy a house and car all because I got a college education.
Don’t count on your child going to a “cheap” school or scholarships paying for school, that’s a rarity nowadays!
miriam says
All I can say is just start somewhere, even if it is only 5 or 10 dollars a week for each child. You can open up an ING account or any other savings account with another bank in their name with you over it, have the money debited out of your account and into that account. Any extra “found” money like birthday money, rebates, money left over from you budget, surveys, yard sales, loose change, etc can be deposited into that account also and not be touched.
You can join upromise, purchase through e-bates and receive rebates, join my points, receive gift cards and turn them back into cash and deposit that money.
There are a number of ways to save money for college, set yourself a goal, maybe an amount each year for each child that you would like to save, and try and work towards that in any way that you possibly can. Be creative, think outside the box, ask God to show you how to do this, be faithful in all the things that you had set your mind to, and He will honor you. Do not get discouraged, but be strong and committed to the goal.
Remember Rome was not build in one day, teach your children the value of money, how to save, how to spend. You can start involving them now buy teaching them that they have a part to play in their future. And most of all God has taught me over the last year, “Not to despise the small beginnings” He will multiply when we are faithful to those things that He has placed in our hands.
God Bless
Miriam
Dawn says
Please remember that your personal mindset, lifestyle, and teaching on finances will help guide your kids on work ethic, spending, and saving. That was the biggest lesson for me growing up and then going off to college. It was just a given that if i wanted to go to college, i needed to work to pay for it. A relative died when i was a child and my parents put my and my brother’s share into savings for college. But we had to come up with half each semester and then we could use this money for the other half. When the money ran out we were on our own. This was a huge blessing for me. It ended up paying half of 4 years of school for me because i worked hard, saved, and went to affordable schools. I was on my own year 5. I also agree with the comments made about not pushing kids into the college mold right out of high school. Tech schools are a great way to learn a trade and get a decent job. As well as work experience is good to save and explore interests in order to better know what schooling to pursue.
Kristi Fulton says
Such an interesting topic, my husband and I have had many discussions about. Our kids are very young and we are still trying to figure out what to do. What I continually come back to is my experience. My parents didn’t have the funds to contribute to any of their 6 kids college education. I was upset in high school when it really set it, but it made me SOO much the better. I worked and saved so much my last two years of high school, applied to a million scholarships because I didn’t get any from my school. Then I came home every summer to work and save money for the next year. I also had a part-time job when I was at school and I never had a car because I couldn’t afford it. It was tough, but I was so much better with my time. I had fun, but worked extremely hard and ended up qualifying for scholarships from my school because I did well. Overall, I got out of my undergrad with no student loans. And I did so well in college that helped me get into every grad school program I applied to. And honestly, looking back, I attribute that success to my parents not giving me money for college.
Obviously, this does not work for everyone and college is very expensive. We will probably end up saving for our children’s education. But I wanted to share to give food for thought. I really took advantage of my college education and the whole experience cause I had to pay for it and work for it myself. That is a life lesson that I hope my children can learn as well.
Michelle says
In Florida we have a state run 529 and Florida prepaid college plan. We opted for the prepaid. You are able to lock in at the current ( current as of when you enroll) rate of tuition that you pay over x amount of years (depends on the age of child when you enroll) until they are 18. We pay $116 a month, but are guaranteed payment to a 4
year state university. Drawbacks: if they don’t go to a
state school it’s only worth face value, state gets interest
earned. Pluses: there are no penalties for withdrawing ($50 penalty only if you withdraw in first 2 years), they have up till 25 to start using it unless active military, then it gets delayed ( you can always withdraw if they don’t use it by 24 11 months), if they get a scholarship you get the current at time of schooling rate of tuition back per semester, and even though the state is gaining the interest we are only paying in about 24k when the projected cost of a 4 year public university degree is over 120k the year our daughter starts college. Since I know I am not an investment genius, we knew this would be the easiest and best guarantee to cover the tuition portion of college costs.
Camille says
We just recently opened a Roth IRA — thinking retirement. You put money in to a Roth IRA post-tax, but when you take it out for retirement, it is ALL tax free (even the money made on your initial investments). I was surprised to discover that you can withdraw any funds that you have put in to a Roth IRA w/o any penalties for ANY reason! You can’t withdraw an money/interest made on the money you put in without penalties. I believe there is a $5,000 cap per person for all IRAs (check with your financial planner on that one). This isn’t a great way to grow your money to use for college, but it will pay more than just a savings account and you can use the money for retirement.
Allie says
I just want to point out that any money put in the child’s name is considered at 50% for financial aide purposes (from about the 11th grade in highschool) but the parents’ money is only considered at 30%. So, putting money in your child’s name could hurt their abililty to get financial aide and grants. Also, any money put in your retirement account can still be used tax-free for your child’s education should you choose. In my opinion, it is best to put as much in your retirement as possible and not in the child’s name.
Lauren says
My parents did an UTMA for me. It was not enough for college, but I got a full tuition scholarship from working hard in high school. I used some of the UTMA money for school fees and a semester abroad. Then when my husband and I married, we were able to use the remaining UTMA funds as part of the down payment on our house. I was very blessed that my parents did this for me.
Lauren says
Also, I went to a Christian school K-12.
Gail says
On a completely different note, another possible option is working at your child’s school for a tuition break. I was blessed to start working full time when my third and last child started at the same Christian school that my other two children attended. It was a huge financial benefit for us. As they started attending the same Christian college, again, I was blessed to find a full-time position and was able to receive FREE tuition. My youngest is graduating from college this May. Absolutely something to start looking into now.
Cherie says
This can be a great way to save money. I worked for several years at a major state university and took advantage of the tuition and fee credit, paying next to nothing for my graduate classes. I basically just paid for books. Employees earned enough credits to cover about half of the hours a full-time undergraduate student would take every year and they could be used at any of the campuses within our state university system. I knew people who used the credits for their children and others who earned their own entire undergraduate degrees this way, just taking a little longer than the usual 4 years. Spouses could also use the credits for graduate classes.
Natalie says
One idea I have read is to contribute fully to your Roth IRA each year before contributing to any college savings plans/accounts. Contributions you make to a Roth IRA can be withdrawn at any time without penalty. The benefit is that if your child decides to go to college, you can use your contributions to help fund that. If not, you will have more saved for retirement!
Corrie says
I have read that also about the Roth IRA. We are currently contributing to a 529 plan for both my boys (in addition to the Upromise 529). But, I have thought about possibly starting a Roth IRA for them instead, since it would be more flexible. If they were to get scholarships or not attend college, then the money could be used for retirement instead without paying penalties.
Julia says
We started our children’s 529 savings accounts in conjunction with uPromise and have found it a relatively painless way to save on a tight budget. The program does depend on using credit cards though.
Julia says
I had to pay and take out loans for half of my college expenses and think that it helped me appreciate my education much more. Kids who have 100% of their tuition covered by Mom and Dad often do not realize how much hard work went into saving such a massive amount; I’ve even heard they tend to get lower grades than students who have to work to pay for at least part of their tuition and expenses.
My husband and I have set up 529 accounts with uPromise, which has been a painless way for us to build college savings for our children on a very tight budget. (This program would not work well for families who operate on a cash-only system though, since you register your credit cards and most earnings accrue through the 2% refund.) But for us, it’s been a great way to get started saving. And it’s possible for friends and family to register and contribute to our children’s funds if they want to as well.
Emily says
I’ve been a UPromise member for years. I currently have it set up that 50% of my earnings go toward my student loans and 25% toward each of my kids. I know that i’m not maxing out my potential with Upromise because I only have my store cards registered with them and use an occasional ecoupon. Do you feel completely secure with registering your credit and debit cards with them? I”ve been debating about whether or not to register by debit card that I use for almost all purchases.
Jen says
Yes, totally confident about registering my debit cards with UPromise. I’ve done it for many years and it has helped me save a surprising amount! It adds up over the years.
Julia says
Yes, I feel secure registering credit cards with them. I’ve heard that debit cards a little more of a liability online, so we’ve never registered our debit card.
We’ve been with uPromise for over 7 years now and have had no complaints.
Ema says
Please encourage your kids to volunteer as young as they are allowed, to get jobs at 15 or 16, and to explore options other than college before they decide what to do after high school. This is not only financially beneficial, but will help them to be much more prepared to enter the adult world. I am in my late twenties and am still struggling to pay student loans for a college education that had nothing to do with the career I ended up in. I wish now I had gotten more job experience when I was a teen. I might have been more sure of my career interests and gone to trade school, then saved up money to start my own business instead of using it to pay off loans.
Elizabeth says
I think this is an interesting point, Ema. My parents took an opposite view with me. I was not allowed to work (other than weekend babysitting) because, as they said, “School is your job.” And I had$17,000/ year in scholarship because of my grades in high school. But, I was always academic and attended a liberal arts college where what I learned was going be applicable to whatever I did. So, it all really comes down to the kid, doesn’t it? Some kids aren’t as sure of their track, and we have to adjust based on that.
sue says
I worked at Wegmans so I got a scholarship through work and always had a job to come home to during the breaks. We got vacation pay so that paid for my books. I was in the top 10% of my high school class so the job didn’t interfere with grades. Actually it motivated me to get my school work done because I had to go to work. I think working at a young age is very good as a lot of kids at college who never worked seemed to be clueless about the real world. Plus it was annoying that they were always broke – lol.
Susan (FrugaLouis) says
My husband and I were just discussing this over the weekend! I went to college on a full-ride scholarship, so my parents gave me a “stipend” of spending money. My husband began a business as a teen and then got a formal degree online in his early thirties. Neither of our parents saved for college, and it worked out for us with neither of us having any college debt. Perhaps this sways our thinking at the moment that there are many other places our money needs to go (retirement/paying off the house/getting a bigger home) than saving for our kids’ college educations. I’m just hoping we don’t regret our decision fifteen years from now… 😉 Thanks for sharing what you and Crystal do, Jesse! I think that’s a great idea to keep the options open for your kids, though it would be especially great if the parents could decide when to “hand over” the reins on the money. Kids can be so different at 21!
Lynn says
To me saving for retirement first is important if you have to choose. My siblings and I paid for the majority of our college thru student loans, scholarships, and financial aid. I certainly plan to assist my children but not pay the bulk. If I am putting money away for my children, it’s going to be for college, not a down payment on a house or anything else, but that is just me. If the UTMA is an asset of the child, how does this affect any potential financial aid they might apply for? Something to keep in mind.
Jessica says
With 529 plans, each state has hired an administrator (often an investment company such as Fidelity, Vanguard etc) to run the 529 plan, so different companies are associated with different states. However, anyone can invest in any state, but often your state will give you additional tax benefits to use theirs. If there is no benefit provided, there is no real reason to use your own state. Some states without income tax offer some of the best options, New Hampshire, Nevada, etc. I live in MA, but they offer no deduction, so I use the NH option. http://www.savingforcollege.com has some good info.
I think it’s worth mentioning that the investment structure Jesse mentioned is actually something offered in most 529 plans, but not the only investment option/structure in many plans.
Also worth consideration is how the different plans are considered for financial aid. A 529 plan is considered an asset of the account owner (not the child usually). Some plans are assets of the child and that may impact financial aid. Also, if you give the assets to the child, and they don’t go to school, they don’t belong to you (as Jesse mentioned) but it also means you can’t save the money for the next child who might to go to school. Just a consideration.. I was a bit better saver when there was just one child :o)
If you take any money out for any reason other than college, any penalties (10%) only applies on money you made on your investments, not your principal.
Emily says
I don’t know much about 529 plans (haven’t researched them yet), but it seems like you’ve done some research and maybe you know the answer to my question. I think you’re saying, from your comment, that you must use the money you’ve invested in 529 plans for education or else you pay a 10% penalty? Do you know if this means tuition only? In other words, can the money you save in a 529 plan be used toward anything education related, such as room/board or books? The reason I ask is that I am hopeful that my children’s tuition will be covered at whatever university I end up a faculty member at; however this differs by institution – some cover tuition, some only partially cover it, and some don’t at all. Since I am not yet a faculty member and can’t guarantee that the school I end up at, I do want to start putting money away for my children’s education just in case we will need it, but I don’t want to lose it if we don’t need it. Does that make sense?
Emily says
I meant to say “can’t guarantee that the school I end up at will be one that gives a tuition discount to dependents”…..oops. Was typing faster than I was thinking.
Jessica says
That’s a great plan. I’ve often thought that I should try to do the same since I might come out ahead instead of just collecting a salary! The 10% penalty is only on profit. You save $5,000, you make an additional $1000 over the years. If you didn’t need it, your penalty (and taxes) would only be on the $1000. If your child gets a scholarship, it appears there is no penalty. (or sadly, if child dies or is disabled). That being said, 529 plans can be used on the following:
-Tuition
-Room and Board (student must be enrolled at least half-time)
-Computers / Laptops (only if the school requires them)
-Books and Supplies (as required by the university)
Plenty of things to spend your money on..lol. Plus, the money can be redirected to another person in the direct family- you, a sibling, etc. PS: I actually worked for an investment company that provided 529 plans, so I had to learn it!
Emily says
Thanks for the additional info Jessica. I’ve put “researching 529 plans” on my to-do list for 2011.
Beth says
Here are a few ideas my parents did to put 5 kids through college:
Though we attended a small private school for elementary school, my parents opted to send us to public high school to keep costs down, and because in our small community they felt like they could feel confident about what was going on in the school and could teach our faith at home/church.
They also used a savings plan for each of us where they saved $200 dollars each year multiplied by the age we were, so that when we were two they only put away $400, but when we were 10, they put away $2000. This allowed them to pace themselves and save less when they had less money available. They invested this money in mutual funds.
One of my brothers opted to attend a technical college and live at home. My parents helped him to buy a vehicle with part of his college money, since the tuition was much less than was paid for the rest of us.
We were expected also to earn our money for living expenses during summers and breaks and also purchased our own books.
Finally, an interesting note is that using this method, I generally spent much less on living expenses than my fellow classmates who were takingout loans. They generally took out more loans than I was earning in the summer. Many of them purchased vehicles or other things that I really couldn’t afford.
Leighanne Johnson says
My husband and I decided to open up accounts for our children this past month, they are very young still. My husband is already saving for retirement and we felt as though we should get an early start and put in $20 each paycheck for each child. We also decided that we are not going to tell our children that they have money until they turn 18. We feel like it would hinder our children from working if they knew they automatically recieved the money no matter what. We want to encourage them to work as hard as they can in and out of school. We have learned, from our parents experience, that it is better to be prepared and not need the money, than to not be prepared and need it. But I believe everyone is different, and has different needs and knows what’s best for their family. As for us, this is what we feel works.
Rae says
We also just started savings accounts for both of our boys that we put birthday/Christmas money in. And before we had it, we put birthday/Christmas money into bonds for them. So they will have both of these things when they become adults but they also do not know about it.
Alysia Merriman says
There is a book I’ve been hearing about which has to do with how your child can pay for his/her own college education…does anyone know the name of this book?
Erica says
There is one out called Debt Free U by Zac Bissonnette. I found it very educational and informative.
Alysia Merriman says
That’s it! Thanks!
Jen (Balancing Beauty and Bedlam) says
Yes, It’s Debt Free U by Zac Bissonnette. “How I paid for an outstanding college education without loans, scholarships, or mooching off my parents.”
Since our oldest is 17, we have been doing some heavy duty thinking on this subject. Since we dealt with a year of unemployment, our college fund isn’t where we’d like it to be and we are thinking WAY outside the box. Bottom line is that we’re convinced that we are not straddling ourselves or our children with thousands and thousands in debt for college. They will end up with an amazing education, but we aren’t listening to what the norms encourage…”every young adult should head straight to college at 18…regardless” is not advice that everyone should be listening too. The long term financial damage can be too painful without giving serious consideration to this topic.
Cristina says
While this is mostly good advice, keep in mind that retirement savings should come first. It’s great if you can afford to fully fund your retirement accounts AND pay for your child’s education, but if you had to pick between the two, pick your retirement savings. Your child can always get a scholarship, work part-time while in college, or take student loans, but you can’t go back in time to save more for retirement.
Jessica says
Very true. And at this point, you probably want to play it safe and not rely on any Social Security.
Amber L. says
I remind myself of this every time I feel guilty for putting the extra $20 into my IRA than into my daughter’s college. I always put birthday/Christmas money into her account, but otherwise most is put into my IRA. I can always pay her college from my IRA, but I can’t pay my retirement from her college fund. I also remind friends and family who want to give my daughter something that the very best thing they can give her for her future is to help fund her college fund, penny by penny. Most put a few dollars into a book she has been wanting and then we go to the bank with the money. Hopefully in the end I will find I made the best choice.
Elizabeth says
Great point!
Jenna says
I find it extremely interesting that Jesse’s Dad did what he could to provide for Jesse and now Jesse states that it is mostly up to the child if that attitude had been the same on the reverse Jesse would not be sitting where he is. Retirement is most important so that we do not become a burden to our children however, watch sense of entitlement as well.
Life for many is full of years of hardship things we do not have control over (in my case parents who stole my hard earned money and used it for their retirement) So just don’t be so quick to judge when you have had things given to you!
Jenna says
I should add I worked from the time I was 8 shoveling snow , babysitting , picking up leaves etc.. I had earned 36K by the time I was 18 when I had my birthday my money was gone from my account taken by my father who decided to retire when he was 36 years old.
Everyone had diffrent circumstances in life!
Jesse Paine says
Thank you for pointing that out, Jenna. I, by no means, was meaning to communicate that a parent should not help out. I received a lot of help from my dad after my mother died and my parents have since provided help to siblings that have gone through college as well. However, I had enough saved up from working to pay for my undergraduate education when paired with the scholarships I received.
What I was trying to note was that a child should bear some responsibility for funding their education and not just rely on the assistance of parents. I should not have used the words “lions share” because this will be different for each family. The point is that they need some flesh in the deal. How this works it way out is up to every family individually. Thank you again for pointing out the need for clarification. I edited that sentence in the post to hopefully make it more clear.
Jenna says
Thanks for clarifying. I did manage to find scholarship money for my two.
However, when things are tough for a person growing up and things are robbed it is very difficult to get back on your feet. I have had a tough time married at 19 put him thru undergrad and half of grad school then started haivng children when he finished he was an MD and he too ran off with all of our cash and left me with two to finish raising and a bunch of credit card debt (which was mostly , his he put in my name) So at the age of 40 I found myself starting over again with just the clothing on my back. I felt alot like the folks who were hit with Katrina only no FEMA help or help from the nation due to my tradgedy.
Life can be very difficult and life can give you things.
It is best for all of us to keep open minds about what the other person brings to the table.
Rick Tra says
It’s best to keep the money in your hand and not put anything in your child’s name.
It’s better for when they apply for financial aide in the future and it gives you more control over the use of the money. If your child receive enough grants then they may not need the money. It’s best to max out your own retirement instead and use that money for your child’s education if required. If you have extra money then put it toward your mortgage which is the highest paying and safest “bond” you can own.
It’s best to stay away from everything else. This simple process will give you the most option in the future and it’s the least expensive to administer.
Elizabeth says
I agree, Rick. 21 is way too young for kids to have full, unfettered access to so much money, and when you have little kids, you have no idea how they are going to turn out. Parents can have the best intentions, and, indeed, do an excellent job of teaching their kids to be responsible, but the truth is that we don’t have that much control over how our kids turn out. For this reason, as well as the tax issues, and the way that money is counted towards financial aid, I would never put money in my child’s name. JMHO.
Sylvia says
Very good advice. I had a trust fund from my grandpa in my name and it greatly lowered my amount of grant money that I received for college. When applying to financial aid, if they see a child has a lot of money they expect all of that to be used towards their education and will give less money in grants. However money in a parents name isn’t “counted” against you nearly as much.
Rick Tra says
Thanks. I grew up on welfare and funded 100% of my education and paid it off 2 years after graduation without working while I’m in school. I’ve researched the formula used to calculate financial aide while in college and read every financial article I’ve gotten my hands on. So this is a subject I’m very well versed in and it’s taken a while to come to the conclusion I’ve written. Many people are surprised by it, especially allocating the majority of my bond portfolio toward my mortgage. It’s a bond that won’t default and I get a home and peace of mind when it’s paid off.
Beth Long says
My experience was quite different. My parents were able to save for their retirement and my education and because of the money that was in my parents name, I didn’t qualify for any FAFSA, and was only eligable for non-need based grants. So, it seems to me that it depends extensively on background/family finances to begin with.
Rick Tra says
Very nice Beth. You have the good fortune of not needing aide. I hoping to set the same financial course for my son with the added bonus that if he doesn’t need aide, he can use the money towards his home close to mine so I can see my grand kids.