Starting a college fund is a great goal, but it’s not the only goal. You need to pay off debt, have an emergency fund, and start saving for retirement before you jump into saving for college. There are other ways to pay for college too, like using grants and scholarships. Bottom line, you need to take care of your future first, then you can bless your kids. It’s not selfish. It’s smart.
As we work through the Baby Steps, so far you have essentially paid off your debts, saved three to six months worth of expenses, and are saving for your retirement. At the same time you are fully contributing to your retirement, you are going to start saving for your kid's college fund. So many people will put this step ahead of their own retirement, but there are so many ways that your kids can pay for college (if they go) but only YOU can make sure that you are taken care of in retirement.
The irony of writing this article right now is not lost on me. My oldest daughter, Calista, finished her exams at Winthrop University today. Next Saturday, we go for graduation. This is very bittersweet, but also gives me first hand knowledge on what college tuition looks like today. Winthrop University is the most expensive public university in the state of South Carolina. And having Calista at the age I did meant that it was all I could do to get myself through college, let alone start saving for her higher education. Basically, it meant that while she was applying to colleges, she was also looking into every scholarship possible and doing all she could to position herself well. She knew that her dad took eight years to finish my degree at Coastal Carolina University, worked while I went to school, had grants, and had student loans. Thankfully, my loans were minimal compared to what some kids had. Adrianne, on the other hand, kept her scholarships through her four years at the University of South Carolina, worked while she went to school, and graduated with no student loan debt.
I wish I could tell you that Calista is graduating from Winthrop University with no student loan debt. The reality is that she is not. Adrianne and I have taken out parent loans through her four years that we have been aggressive to pay off and have cash flowed a lot of her college expenses. Even with that, she will graduate with federal student loan debt, but compared to most college graduates, it is a minimal amount.
Eleanor on the other hand, has a 529 that Adrianne and I contribute to monthly and also make an annual lump sum contribution to. We are in a place to save for her college fund. So what should you do?
First, take a look at the tuition prices of the colleges your kid is looking to attend, and take a look at the statistics of that school on scholarships available and percentage of students on scholarship. You need to have a number in mind of where you need to be and then back into that number.
Next, open a college savings account. Look into ESA and 529 plans. Understand how each works and what the pros and cons are.
Third, make sure that your student is doing everything they can to ensure that they are paying the least amount possible out of their pockets. Apply for every scholarship under the sun, apply for FAFSA to take advantage of any grants available, take higher level classes, and of course, save!
There is no magic number, but you can put your kids and yourself in a position to give them the best footing possible!