One of my biggest financial goals has always been to help my kids get through college. By “help”, I don’t mean spend every dime I have to ensure their financial future while jeopardizing my own. No, I want to create a comprehensive plan to do what I can for them for college – and to help them to help themselves.
I often see young adults deep in student loan debt, where no one helped them to get started. They didn’t have help making a wise decision on what college to go to, how much debt to take out, or how to get rid of that debt once incurred. I also see parents who throw up their arms in helplessness at college costs. Those parents think that they’ll either never be able to pay (so why try) or they have no choice and have to go broke to assist Johnny or Jane get through school.
There is another way – another path you can take. Let me walk through my favorites resources around sending kids to college.
Saving and investing for college for kids can seem overwhelming. There are so many unknowns, especially when your kids are young, and so many variables. What college will they go to? Will college costs continue to increase as much as in the past? What about all the non-tuition costs? You want to ensure the safety of your own financial future while still helping your kids.
Enter: the College Compact.
This idea was inspired by the Investment Policy Statement, which is another key to financial freedom. I was giving some serious thought to how I could get more specific with my college savings goals. I created an easy five-step process for you to create a detailed, two-page long agreement with yourself and your children on what you will – and won’t – pay for. It sets a clear goal for you to target, clear expectations for your kids so there are no surprises when they apply for colleges, and leaves room for flexibility as your life and circumstances change.
Save Early – Save Often – Save What You Can
Seeing that college will cost $100k, $250k, or $400k – the scare stories in the traditional media – can be enough to make you give up before you start. “There’s no way I’ll be able to save that much”, you think, “so why even try.”
I know how you feel. My oldest son was born literally two months after I finished putting myself through college (more on that in a minute). Back then, my husband and I made a low combined income. It took us years to crack the $50k per year combined mark, and although we didn’t struggle, we did live simply and inexpensively. But I still wanted to save and invest for college, to help my son with resources that I myself did not have.
So I scraped together enough to open a Vanguard 529, and added small amounts over time starting when he was just a year old. I did the same thing when my second son was born, three and a half years later. There were times I needed to stop saving completely, like when my husband almost died of septic shock six years ago. But over the years, I put aside what I could, when I could. You can see the results of what that looks like here, with real contributions and returns.
The power of investing small amounts over a long period of time can’t be overstated. Compound interest really is a miracle. You have to just start now, where you are, with what you can.
Save Early – Save Often – Save What You Can
When it comes to saving for college, more isn’t necessarily better. Sure, if you can put tens of thousands of dollars aside when your kids are little, college will likely be a breeze financially. But when my oldest son was born, I was 23 and only two months finished with college. I couldn’t set aside much, but I did the best I could. So when it comes to college, save early, save often, and save what you can. Check out my top tips on getting started saving for college.
Do Your Research
Sometimes I meet high income folks who want to depend on Uncle Sam to fund college. It’s not because they can’t afford to save – it’s because they’d rather have nice vacations, fancy homes, private school, and other things. Believe it or not, you’re not getting free money from the government if you’re high income and don’t feel like saving.
And lets not forget that folks think their kids can get loans for college, but they can’t get loans for retirement. I hear this All. The. Time. It’s not necessarily true though – at least not how you might be thinking. Be sure to check out this article for more.
Seek Out Alternatives
Lets say you set aside what you can, and create your college compact, and your children will be responsible for quite a bit of their own costs. OK, that’s the reality of the situation. What can you do to help them? I have a few suggestions for you.
I myself went from spending two years at a community college to getting my MBA at my state flagship university. Today, no one knows or cares that I got my first few years of credits at community college. I appreciated a lot of my teachers there, as they worked full-time in the fields they were teaching, and so had a lot of practical, real-world knowledge to share. And my fellow evening/weekend students were often adults working full time who had a deep appreciation for college. They were footing the bill, and sacrificing their free time to be there – so they took it seriously in a way that younger students did not.
I’m not alone, either. My friend the FI Journeyman was kind enough to stop by and share his story of going from community college to millionaire. Be sure to check out his inspiring story.
Many folks go this path for grad school, but you can do the same thing for undergrad. How do I know? Because I did this. I worked full-time during the day at an insurance company call center, and went to school full-time evenings and weekends to get my bachelors. I ended my undergrad completely debt free. There are tons of companies that reimburse for college classes – Starbucks and UPS are two that come to mind immediately. This can be a great option to pay for college entirely, or to help keep debt down during school. Find out more about how I did this here.
Give – And Ask For – The Gift Of College For Kids
As the mother of a fourteen year old, I can speak from experience when I tell you that very few of the gifts your child receives will be useful to them in the long run. Toys will break – and most kids get more toys than they can play with. Fancy, expensive clothes are outgrown as fast as you can blink. Diaper bags, strollers, cribs, and other equipment are only useful for a year or two. But the gift of college can last a lifetime. Encourage family members and friends to give your kids the gift of college rather than more “stuff”.
529 Pan Giveaways – Many state 529 plans host various giveaways, bonuses, or contests. Follow your states college plan on social media, or check often to see what they’re offering. Enter everything that comes up – you never know what you’re going to get! My oldest son actually won a $2,500 random drawing scholarship from my state’s 529 plan, just because I was on the lookout for giveaways and had him enter. Check out my giveaway guides here.
If you haven’t already, be sure to swing by my comprehensive Family Finance page. Don’t see an article or resource you’re looking for? Drop me a note at firstname.lastname@example.org to recommend future articles or request resources.
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