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Saving for kids beyond college?

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  • Saving for kids beyond college?

    Anyone saving extra for their kids beyond college? The general trend seems to be that a 4 year degree isn't enough in many fields, and let's face it, we all know that tuition and all the costs associated with postgraduate studies is going to continue being ridiculously expensive.  Or do you figure that the kids should just be financially independent from their parents once they graduate college?  Would be interested to hear opinions!

  • #2
    As a start, the best thing you can do for your kids is fully fund your retirement so that your kids do not have to support you financially as you age.  I don't save for my kids specifically beyond college 529 plans that I expect to partially cover their college tuition.  If I continue to earn a high wage and my investments perform well, I expect to be able to cover their college tuition through the 529 and other savings.  By the time they graduate college, I expect to have a fairly significant nest egg to support them if we choose to do so, but I am not saving specifically for that purpose.

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    • #3
      once one is situated financially to ensure you will not be dependent on your kids, i think it is prudent to have some extra saved (probably outside 529 so it is flexible money). It can be more difficult to graduate in 4 years to compared to 15-20 years ago.....schools make it more cumbersome to switch majors or transfer by not acknowledging credit hours. Kids who work more than part-time during college or play collegiate sports (particularly ones which play/train year round) have time issues to finish in 4 years. Gap years before college are VERY popular now (another year of parental support) or during college.   It is kind of personal decision to what extent you want to help your kids get up and fully functioning. If your kid graduated college and wanted to be a physician and didn't get accepted to the schools he/she applied? would you continue to support, or partially support until they got in? there are just a lot of "what ifs"....

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      • #4

        Here's the breakdown from our clients:

        • ~10% want their children to have some skin in the game at the college level
        • ~60% are saving for 100% of college
        • ~25% are saving for 100% of college and to partially fund grad or medical school
        • ~5% are saving for 100% of college and 100% of grad or medical school

        Plan is to fund 75% of projected costs using 529s/Coverdell ESAs and 25% using taxable accts.

        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5

          If your goal is to help with their education costs, start saving for kids college education when they are really young.


          Plan to have enough saved to a good 4 year college.


          Good luck on estimating both the future cost of education as well as your rate of return on the investment.


          If you stay on track with saving and your kids can go to a good state school there should hopefully be extra money left in the end to use for grad school.


          That is how it will work out for my 2 with >100K left to fund postgrad for each.

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          • #6
            Our 529 savings are for projections assuming private college at the historical CAGR. Since those are pretty much worst case assumptions if they want to go to a private school they may choose this but will have little waiting for them for grad school. Alternatively, if they pick a better value school they'll have money left over for grad school. And if they have money left over in any scenario they'll hold and transfer to their own kids without using cash flow as we have been. It's far too difficult to project college expenses, let alone which college, which grad school or if any of the above period. Best to have a reasonable amount set aside to cover any reasonable college scenario and let their preferences determine their own fate IMO (with some guidance of course).

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            • #7
              My kid has a roth ira, that's probably in the beyond category.

              If we can swing it, I hope to pay for his med school one day.

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              • #8
                Both of our kids were told that we'll pay for 100% of undergrad tuition, fees, and living expenses for in state college (there are several great options in AZ), and if you want to go out of state or private and expect us to pay for it there needs to be a better reason that "it would be cool go to college in San Diego". They're on their own in grad school, if they choose to go.

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                • #9
                  My parents were able to help with both of our post college education (good investment practices and some luck with scholarships). I don't think that was their original intent though. They were happy to help as it didn't impact their retirement plans.

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                  • #10
                    if my kids go to grad school, there will be money in the 529 for that.  there is likely to be plenty left over (either myself or grandchildren) and I'm planning on continuing to fund it until i don't know when.

                     

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                    • #11
                      My kids get public or private four year college “on the house”. After that, they have a UTMA with $100-120k for grad school, starting a business, buying a house, a year traveling in Europe, buying an @Craigy caliber automobile, caseloads of Brunello, or whatever. But after that money runs out, they will have to wait for me to kick the bucket and then hope that there is any leftover.

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                      • #12




                        My kids get public or private four year college “on the house”. After that, they have a UTMA with $100-120k for grad school, starting a business, buying a house, a year traveling in Europe, buying an @craigy caliber automobile, caseloads of Brunello, or whatever. But after that money runds out, they will have to wait for me to kick the bucket and then hope that there is any leftover.
                        Click to expand...


                        Be careful about economic outpatient care (as discussed in The Millionaire Next Door).  The people I know who have had significant economic support from their parents after graduating college all have issues--both with how they manage money and otherwise.

                        I'm glad my parents stopped providing for me after age 21, when I graduated from college (I had a full undergrad tuition scholarship but they paid for room and board).  I think it's good for young adults to have some skin in their own game.  Do you really want to pay for your kid's PhD in Russian literature?  And yet, if that's their dream, do you want to discourage them from it?

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                        • #13







                          My kids get public or private four year college “on the house”. After that, they have a UTMA with $100-120k for grad school, starting a business, buying a house, a year traveling in Europe, buying an @craigy caliber automobile, caseloads of Brunello, or whatever. But after that money runds out, they will have to wait for me to kick the bucket and then hope that there is any leftover.
                          Click to expand…


                          Be careful about economic outpatient care (as discussed in The Millionaire Next Door).  The people I know who have had significant economic support from their parents after graduating college all have issues–both with how they manage money and otherwise.

                          I’m glad my parents stopped providing for me after age 21, when I graduated from college (I had a full undergrad tuition scholarship but they paid for room and board).  I think it’s good for young adults to have some skin in their own game.  Do you really want to pay for your kid’s PhD in Russian literature?  And yet, if that’s their dream, do you want to discourage them from it?
                          Click to expand...


                          I've been where Anne is,  and now am slowly coming around to vagabond point of view.  if you are going to die with multiple millions, if your kids will inherit it, their lives will be different than yours.  so I'm trying to slowly (like in their 40s if I'm still alive) ease them in to some money.  even if I'm dead, i will set up the trusts that way.

                          hopefully the money will be a gift and not a curse.

                          ymmv

                           

                           

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                          • #14
                            I'm struggling a lot with how to approach this (have a brand-spankin'-new 2-week-old).  For now I think I'll put $20k/year into his 529 and re-evaluate later.  I may change that up a titch and superfund $150k into it next year, plus $20k/year thereafter (yes, I know that will count against the estate tax exclusion until the 529 superfunding period wears out, but I don't really care--if my estate is big enough to invoke the estate tax then I am not going to try very hard to avoid that, as I'm a firm believer in the estate tax).

                            I definitely want to pay for four years of wherever he wants to go for undergrad, with the caveat that if it's not in-state tuition or close to it, he'll have to justify the extra cost (Harvard?  MIT?  Caltech?  Fine.  Random liberal arts school or University of Chicago?  Nope. You are limited to in-state tuition.)  I think my approach will be that I set the 529 at whatever I decide, I commit to top it up if there's not enough in there for undergrad, and anything that's left he gets for post-undergrad.  But who knows how I'll feel or where any of this will be in 18 years.

                            So daunting since Harvard and similar schools will be $600k+ for four years' tuition 18 years from now, if you believe the calculators.  Not to say my kid's going to get into Harvard, but I have to prepare as if he will.

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                            • #15




                              I’m struggling a lot with how to approach this (have a brand-spankin’-new 2-week-old).  For now I think I’ll put $20k/year into his 529 and re-evaluate later.  I may change that up a titch and superfund $150k into it next year, plus $20k/year thereafter (yes, I know that will count against the estate tax exclusion until the 529 superfunding period wears out, but I don’t really care–if my estate is big enough to invoke the estate tax then I am not going to try very hard to avoid that, as I’m a firm believer in the estate tax).

                              I definitely want to pay for four years of wherever he wants to go for undergrad, with the caveat that if it’s not in-state tuition or close to it, he’ll have to justify the extra cost (Harvard?  MIT?  Caltech?  Fine.  Random liberal arts school or University of Chicago?  Nope. You are limited to in-state tuition.)  I think my approach will be that I set the 529 at whatever I decide, I commit to top it up if there’s not enough in there for undergrad, and anything that’s left he gets for post-undergrad.  But who knows how I’ll feel or where any of this will be in 18 years.

                              So daunting since Harvard and similar schools will be $600k+ for four years’ tuition 18 years from now, if you believe the calculators.  Not to say my kid’s going to get into Harvard, but I have to prepare as if he will.
                              Click to expand...


                              Congrats on the new baby. Don’t be surprised if your attitude changes as your child(ren) grows up. I might have typed the exact same post 19 years ago re: private vs. state college, but my feelings changed quite a bit over the years and my position softened. Best of luck.

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