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Nothing wrong with community college for 2 years and then transfer somewhere
That’s the route I did. And 9 years into my career I’m at 175K TC
Yep, I did that too. CC was free because my high school test scores were high and I was able to work my way through college. Graduated in 4 years from a state school, full time student, part time worker. Took on minimal loans and had them paid off in a couple years. I was first one in my family to go to college and was raised lower middle class. I now make an extremely good living in a LCOL area and on track to retire in my early 50s.
at 17, my parents said we provided you a good home, good food and good vacations. the day you leave for college youre on your own. turned out great for me lol. didnt ask for a penny from them since i left for college. went to a public school. applied crazy for scholarships and worked to cover other expenses. graduated in 4 years debt free. loved them for that. made me a responsible independent person. 10 years later, which was 2 years ago....they gifted me my "education savings." got $1M from that education fund that i didnt use because they played tough love and i didnt call their bluff lol.
Are private schools really worth it? blah. Ill never send my kids to private school and ill never pay for more than 50% of their college cost. being an adult is figuring how to survive. it starts with college. lol.
I can tell you from 40 years' accounting experience that private schools are not worth it. (the joke for one private univ near me was "that's where you BUY a degree". Some of the graduates were not very bright, either. Go to a state college if you feel you must have a 4 year degree. If I were starting over, I would look at a trade...they make much more money than many college grads.
How old are the kids? We front loaded our contributions to maximize the tax free growth. Saved $375k (9) and $280k (6). With stock market returns we think they’ll grow enough to about cover an expensive private college. Will likely add a bit more to the 6 yo’s as sequence of returns grew the account more for the older one.
There are plenty of good universities in Europe where 50k is more than enough. Don't be blinded by your local conditions. It's a big world.
529s can be used for foreign colleges also..and it’s much cheaper!
I assume private college will be around $500k for 4 years by the time my kids go in ~15 years. I will stop contributing by the end of the year and they should each have about $200k, which if all goes well should be about $500k by the time they need it. If they go in state, they will have some left over for grad school. If they go to private, they will probably have enough. If not and we’re doing ok, we will pay the difference, or they can take out loans.
Serious question, why not give the child a $100k investment deposit and $100k in 529?
In 40 years when they turn 60 they’ll have $1.5M on the $100k investment. $300k turns into $4.5M. All numbers adjusted for inflation and in today $s. This all assumes no additional contribution throughout their career.
We have provided $125k per kid and have been clear we are not paying for spending money or gas. Their tuition and lodging is covered and whatever they saved while working in high school and/or make during college. It's worked for us.
For a kid born today, 18yrs from now when they start college, a $400k college expense today, with 5% increase every year, will balloon to $960k when they start college. The rate of inflation for college tuition is at least 5% if not more.
There are ways to get free funding and savings that can give you great ROI besides 529. It's more flexible, tax free, and with protection to make sure it's secured from any loss.
I'm a Financial Professional and helping families prepare and get their kids school funding. I also help business owners and hardworking employees better their finances through strategic protected savings & investing.
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$250K+ is what you are thinking of budgeting for your child? Think of the ROI on this. You must be looking at out of state or private schools with no financial assistance like Scholarships. My son is graduating this year and we went through this exercise. Out of state private schools yes, $250K-$300K for well recognized schools. He was accepted into all his applied schools for Engineering. We did the payback on that vs the local state University which he would have full merit scholarship so we need to foot housing ($12k/yr) We saved $140K for him for college through a brokerage account over 18 years. He had a choice, spend $48K for in state University that will probably provide him a job within 5-10% salary of the big name schools and pocket almost $100K to start his life, or spend it all on school + debt to start his life. Easy decision. There are also programs like WUE that will give some students in-state tuition for out of state program schools. Crazy to let Universities rip you off like that.
You realize with the 529 that qualified withdrawals are limited to published school costs at the university the kid attends correct? 250k sounds like a lot to sock in to that account, let’s say the kid goes to Harvard current published total cost is $82,866 and your kid has a scholarship, cause well smart enough to go to Harvard likely a scholarship involved. Anything left over that’s not qualified will have deep penalties on withdrawal, better off investing that elsewhere.
The ‘deep penalties’ part is overstated a bit. If a child gets scholarships, you can withdraw that amount penalty-free (still pay income tax on gains). You can also change beneficiaries, use it for grad school, or even roll some into a Roth IRA now under newer rules.
Send your kid to state school for 100k all up for 4 years. Make it 60k if they go to community college for 2 years. Make it 40k or less if they live at home all 4 years and go to CC. Make it 30k or less with scholarships if your kids are smart.
we had about 50k saved and that has lasted 2 years. we are at the university of Alabama. no scholarships.
I think universities, like primary school, should be free, which would completely avoid this entire situation!! As high as taxes are now, there's no reason why they shouldn't also apply to education levels of ALL types!! Unfortunately, "tough love" doesn't work for everyone, because individuals have different needs! There are many who CAN work through college with little problem, while others find it highly stressful, which leads to dropping out! For people who are strong academically and emotionally, there's great success with such an approach, but many don't fit into this category, and there's no template which applies to each person identically!
Let me lead off with if your financial situation permits that level of 529 fantastic. Personally, I paid into 529s for my children as much as I could afford resulting in about 50k per kid. When they started high school I told them both I have 529 accounts for their higher education told them they could go anywhere they wanted but anything over and above what I set aside was their responsibility to cover either via working or scholarships. So far one kid is out of college debt free between what I provided and the kid provided via work and scholarships. My second is just starting college and based on the kid's calculations as we are in good shape.
I guess my point is do not sacrifice to give the children effectively a free education, aim to cover a portion of the higher education and they have to work for the rest.
Also remember if the 529 is not used by the benficiary for education expenses you will be on the hook to pay taxes on the gains and on say 125k that is a big number.
The most important thing and most financial planners will tell you make sure your needs are covered. For example, if putting less into the 529 means you payoff your mortgage sooner aim to pay down mortgage sooner, if you want to travel do it. We as parents already do so much for our children, giving away our future retirement comfort is silly.
It seems to be trending towards $100K a year for tuition, food and shelter. even state schools are nearly $50k. Though the job/school landscape has changed so much not even sure what's in store for these kids. There are rumors (from my Financial Advisor) that 529s may change in structure to accommodate this issue as less kids are going to college and you don't want all the money tied up in education only funds.
4 years for Uncle Sam then let him pay for it👍
Also it might be beneficial to look into a different type of trust—not just 529. Weigh the conditions for each type of investment account
Depends what they want to do. I figure it’s an investment in their future. If the alternative were taking out $500k in loans, that would put them in the hole in early adulthood, causing millions in drag on their long-term wealth accumulation. I am someone who has had to pay for both undergrad and grad school and thought it was worth it, even with having crushing debt for over 10 years. If I didn’t have that debt I think I would have taken more risks earlier in my career and been in a very different spot. I hope to provide that freedom and safety net for my kids.
Depends a lot if it is a public or private school. If public, if out of state. And on any merit or needs scholarships. If you are paying full freight for a top private, including room and board, you're at 90K plus today. Factor in rhe price of tuition increasing faster than inflation you'd need 500K per kid depending on their ages now. If you go in state public, 250k would probably cover both, even if they are just toddlers now.
Our 3 kids all graduated university in the past 3 years. We spent about $500k (1 private, 2 public). Honestly the ancillary expenses were the shocker. Living costs, spring break travel, keeping them in cars, etc.
If you are a relatively high paid professional, which I suspect you are, shoot for 50% of the total cost in 529s. You will easily be able to cover the rest out of current income. Don’t over save for this. It is not necessary.
I plan to be retired well before the kids are college aged, so getting this all tee’d up for them is part of my FIRE plan!
Friends on how old the kids are. 250k is good if the kids are starting school soon. Also, that is more money than most people have. We worked with our son the decide together which school he wanted to attend and it included the concept is the cost.
He could attend X school and have money left over. Or he could attend Y school and take some addition loans to supplement how much we saved. There are plenty of excellent public colleges and universities that won't cost nearly that much