Saving for your kids' college

How much do you put away? What do you put it into?

Etc., etc.

 

We're paying in over a grand a month. We had ridiculous childcare bills when my kids were younger and as they entered school (one is still in pre-school) all of the money that we were paying into childcare, we put into the college fund.

It's safe to say that my oldest, who was born before I lost my journalism job has a lot more in his account than my youngest does, but we're putting a lot in to make sure both are fine...

Then, when both of them get football scholarships, my wife and I can retire early...

 

great job by you. very envious.

 

I had a mutual fund that was set up for me when I was very young by my grandparents. They put a lot of money into it and it really helped me a lot when I was getting my undergraduate degree. Mutual funds are pretty good, as far as I know, about remaining steady and not being high-risk funds.

 

Tip from all the financial advisors I've read and/or talked to: Don't shortchange your retirment in favor of your child's college fund. When the time comes, they can get student loans if needed (and you can always help pay off those if you feel obligated). Institutions will help them invest in their future. When you're 60, nobody is going to invest in your plan to sail off into the sunset.

 

I'm stunned at how much we've saved in the last five years, especially since I had two unemployed stints during that time. We had a lot of friends and family tell us how important it was to do when they're young and how they all wish they had started earlier.

 

That reminds me, I need to start playing the lottery.

 

We tried the lottery plan for our two college-age kids and it didn't work. So we've simply borrowed gobs of money to cover the amount that we didn't save for. And now we make huge monthly payments until we pass away, at which time the lenders get to carve studentloan.org on our tombstones.

 

Retirement is a much more crucial investment.
We've started putting money away this year for children as part of making plans to have children.

 

Retirement... That's funny... Like any of us will ever be able to afford to retire...

 

One solution is to put everything you can into your 401K or IRA, where educational expenses are a penalty-free withdrawal regardless of your age. That way the money is used as you need; you have options and don't have to declare your intentions 15 years ahead of time. The drawback is that when you're eventually taxed it will be in your bracket instead of in your kids' bracket as with a 529. However, the advantage of access to a number of high-performing select funds through an IRA, instead of the milder selections offered by a 529, probably makes up for the tax difference.

Mizzougrad: I know you're joking, I see the smiley ... but it is possible to build a retirement even without a huge income. In America we tell people to save 6 percent of their income. The average savings rate of a middle-class Chinese family is 35 percent.

 

I was lucky that the first paper where I worked had a 401K match that I don't remember signing up for, but I guess I did and holy crap am I glad I did... Having that money taken out of my paycheck when I was in my early 20s and barely noticed it was gone was a Godsend.