How much is enough to save for college?

[gatorsmom]

I am way out of the loop for how much colleges cost. If we are going to start college savings accounts for our kids, what is a good goal amount? Obviously it's hard to pinpoint a round number since there are so many variables, but I guess I'm wondering if in 18 years $25,000 will even make a dent in college tuition for a year?

Is this a stupid question?

[maestramommy]

I don't think it's stupid at all. Dh and I created 529 accounts for the girls when they were born. All the gift money Dora got went into her account. Then all the gift money Arwyn got plus enough to match Dora's initial deposit went into her account. Any time they get monetary gifts it will go into the account, at least for now. I think we have a plan for how we will add to it each year, but at the moment I can't remember what it is.

It's never too early to start saving, but try not to stress about actual amounts, just do the best you can. And DON'T sacrifice your retirement plan to do this. That was the first piece of advice we were given.

[Tracey]

After you have six months of your yearly income in savings, are contributing all matched dollars in your 401k plans, and have a fully funded ROTH for each of you, then you can worry about a 529 plan. College money can always be borrowed.

[KBecks]

I don't know either. There are tons of variables. I did calculators at Fool.com and other places. We have invested an inheritance I received earlier this year and it may pay for both boys' college or it may only pay for half or less. It depends a lot on the school specifics, etc. I don't know. Our goal was not necessarily to pay 100%, but to be in a position to provide at least half of the costs of an undergrad degree. We want to help them avoid tons of debt as long as we can afford to help. I do expect the boys will pay for some expenses on their own. We'll lay out our expectations and what we might be able to contribute around junior high or so and expect the boys to do their part in getting good grades and saving any of their earnings while in high school.

[JenaW]

definitely NOT a stupid question. DH had to pay for a portion of his college edu out of pocket (his mom could not afford her expected contribution), and as a result dropped his meal plan and put all his food on credit cards while working 2 near full-time jobs to come up with enough money,. so he feels very strongly about helping our kids. As others mentioned, fund your own retirement and savings accts first. DH is a physician so we know that most financial aid options will not be available to us, and as a result we are putting a lot aside for our children given the very likely possibility of having 4 (or 5) kids in college simultaneously if they all go to college. I think he read somewhere that a private 4yr college could cost about 300k in today's dollars in about 14 years (when our first will be college-aged). There are web sites that allow you to calculate based upon what kind of school and how many kids how much you would need to save. Let me know if you want the link and I'll ask DH when he gets home. But, also like others mentioned, if you save ANYTHING you are already ahead of the game, and most people will qualify for some financial aid or loans as well.

jera

[Pennylane]

Lisa,

We started saving when all three of our children were born. I currently put away 200.00 in each of their 529 plans every month. My Financial Advisor just did a new projection for me on college expenses in 12 years and at the rate I am saving we would still fall short to pay for 4 yrs for each child.

You need to remember though that you can always get loans for college expenses but not for retirement. I am still planning on cutting back what I put into their funds and start putting more into mine.

I have always felt strongly that a college education is something I want to pay for. I really don't want my dc to start out in debt from loans.

Call your bank and ask a financial planner to do a projection for you. It's usually free.

Ann

[BeachBum]

I think very few people can afford to save "enough" for their child's college education. Plus, it's hard to calculate how much that will really be. Who knows how much college will really cost.
We put about $400/mo into DS 529. It certainly wont be "enough" if he wants to go to an out of state or private school. But incurring that debt will be his choice. I would like to have enough saved so that DS and I (we) have options. I firmly believe that having to pay for part of my education made me take it more seriously. Of course I hope I'm raising DS to be a smart, responsible person but if he turns out to be a flake I'm not going to let him piss away our hard earned money either. I want giving him the college money to be a choice we can make at that time. I just hope I'm doing enough now so that we have the option.

Another option to look into is your states "pre-paid" plan. It is a great deal if your child does in deed to in-state. If your child doesn't use it, it pays a pitiful 3% rate of return. But being able to lock in tuition rates is awfully appealing.

[overcome]

PP have given you the same advice I would
-have your own retirement savings plan in place first
-you can always borrow for college, and by the time that rolls around, you will probably be in a much more secure financial situation than you are now (i.e. mortgage paid off, making more $$ in your job)
-find a financial advisor that you can trust (ask your friends/family...I hav e a great one if you are in NE PA!)

Also, I am totally all for borrowing the $$ when needed. I am in the camp that it is the parents responsibilty to pay for the college education. If my DD ends up with a terrific job, she may want to pay the loans (my cousin just graduated from law school and got a job with a starting salary of $100,000.00. He is happy to pay the school loans as that is probably twice what his retired parents are bringing in). If she doesn't, I don't mind paying them or helping or whatever. WHo knows what the world will be like in 18 years...college may not carry the same weight it does today....

GL

[belovedgandp]

If you look at the hardcore numbers of covering everything for a private college degree in 15+ years, it's absolutely scary. But I don't think that's a realistic savings goal for most people, plus it may not be the best place for your money.

I totally agree - fund retirement and Roths before doing any college savings.

I'm paranoid about dedicating too much of our savings in 529 and ESA accounts that could only be used for college. Hate to have kiddos not go to college or get scholarships and not need the money.

We currently have a 4YO and 8 month old and are planning on a third. We've had a couple of windfall years, so I've set my goal is that by 2009 we would have enough in our two 529 and ESA accounts to cover 6 years of basic tuition, fees, books, and room/board at a state university. We will then stop putting money in those accounts. The hope/plan is that while education costs have grown quickly in the past five years hopefully the big jumps will slow down. In theory those funds should grow at about the same rate, hopefully a little better than school costs increase.

We'll be able to redistribute the six years worth of funds among the three kids depending on circumstances. Plus, if all our other plans work out we'll be better equipped with resources to help them in 15 years then we will be to save in the next 2-10.