Another saving for college question!

[traces7]

I was reading another thread about college and it got me thinking/worrying. My DD is just finishing 6th grade and we don't have anything saved for her for college yet. She does have a small savings account that I said is her college money, but that's it. I know it's a little late to start now, but better late than never I guess!

Where should I start? I've always thought about the 529 plans, but wasn't sure about them. We have one here in Wisconsin I was thinking of signing up for. How do they work? Any advice? We don't have a lot of extra money to be putting into one, is there a minimum amount you can do?

At first I was a little worried maybe DD wouldn't want to go to college, but she's already talking about it, so she will probably go. She's a straight A student, 4.0 GPA so far, I'm really proud of her. I've told her if she keeps her grades up maybe she could get a scholarship!

Also how does a 529 plan affect how much financial aid she could receive? When I went to college I received a lot of financial aid (my mom didn't make a lot of money). I'm sure that they'll say we make too much for my DD to get financial aid anyway (but we really don't make much), but I was just wondering how that worked.

Thanks for any advice!

 

[brymolmom]

Definitely better late than never!

I would say that instead of hemming and hawing....just DO IT! Whether it's a 529 or another savings option (heck - even start by just putting it into a savings account) - just start TODAY! Even if you can only put a few dollars in it - IMO, the most difficult part is just STARTING it....then it gets easier.

We have 529's for both kids. The most difficult part was starting it. We setup direct deposit (which I HIGHLY recommend) to put $60 a month into each of them. We have since upped that amount quite a bit. But it is so much easier when you don't even 'see' the money in your check. When we have gotten a raise, I have gone online and just upped the amount for the 529 withdrawals by a bit. And never even noticed the difference because the amount in our check has not changed.

I do not know if there is any option that would reduce your income for financial aid calculations, although I would guess if you spent all the money you WOULD have put into a savings plan...you wouldn't have as many assets by the time you fill out all the financial aid forms. However I personally think it would put your child in a worse position for schooling, especially if you don't suspect you would get much aid anyway. DH and I know we won't get any aid, so that hasn't been a factor in our decision.

I can tell you it feels very good to have something setup - even if you only start with a little bit! Good luck!

 

[An_Island_Girl]

It's never too late to start saving!

We have put 10K away each year since our daughter was born, but I'm sure that whatever amount you can save will help her out in a huge way! I'm in the minority, in that we use CD's for her college fund, rather than a typical college savings account.

My parents were able to pay 1/2 of my tuition, and luckily I was able to make the other half up in scholarships. We hope that by the time our DD7 goes to college, we will be able to pay the full bill after any scholarships.

 

[libraryfreak]

It's not too late! And kudos for your daughter, she sounds like she's doing great.

Clark Howard has a good piece on 529 plans, his first sentence tells you to first make sure you are maxing out your retirement savings. Thats because you can borrow for college, you can't borrow for retirement. He then has a lists of 529 plans - great and good. I don't see WI on either one. The article probably tells you what to do if your state is not on the list.

The best benefit of a 529 is that the growth is tax free. If you put $1000 in now, and when your child uses it in upteen years its then worth $5000, you will use it tax free; whereas if you put it in her savings acct for that period of time she may have to pay taxes on the interest. If you put it in a mutual fund, you'll have to claim the growth as income. The other part is that when you put that $1000 in it, you can usually deduct that from your state tax return and owe less money.

As for FinAid, go to fafsa - they have an "estimated financial contribution" (EFC) calculator to use. Parents assets are counted heavier than assets in your childs name, but in my opinion the EFC was quite high anyway so it didn't much matter who's name the money was in. Money in retirement accounts is not counted at all, IIRC. I think some people think that if they save less they'll get more FinAid, but I think the aid you get because of that is not enough to justify not saving money.

 

[aprilgail2]

I opened a 529 for my daughter as soon as I got her SS# when she was born--but its never to late!! Start one now and you still have 6 years to put into it! I have 50.00 taken out of my paycheck every week and put into there-if its not in my check then I don't miss it! My brother is single and makes twice what I make and he started his own for her and he puts more in each week than me. I don't count on any financial type aid though because who knows if it will still even be available with all the cuts happening!

 

[hanutedmansionmomma]

My DD is going off to college this fall. We didn't save anything because 1) I'm still paying off my college loan 2) We would just get loans anyway.

WRONG!

Save any amount you can!

The out of pocket expenses just to register and put down a room deposit have put a big dent in our budget. There are also LOTS of incidentals - trips to visit colleges, spending $ while she's there, new bedding, etc.etc.

I wish I wish we had saved even a few thousand dollars specifically for college to help get us through the initial expenses. Any additional amount you have saved will just be less of a loan you or your child needs to carry later on.

Good for you for thinking about it sooner than I did

 

[ceecee]

Don't forget you can use a Roth IRA for your children's college ed, if you're ages are in line...it could save $ if you try for any grants. It doesn't show up as college $ for the child.

 

[Disneyliscious]

Might I suggest Upromise.com? It is SUPER easy to save money there. Their coupons as the best! You select what coupons you want, scan your Kroger (or grocer) card and instead of taking the coupon amount off your bill it goes directly into your Upromise account. You can also get cash back from purchasing online at thousands of places....anywhere from 1%-15% of your purchase goes back into your Upromise account. Im a very casual online shopper but I easily get a few hundred dollars a year in my UPromise account. It works for dining as well.

You can also get friends and family to easily have their savings put into your account as well. Just add their cards to your list. If she didnt go to college, once your account reaches $250 you can cash it out and spend it on whatever.

Cant beat it!!

 

[MrsPete]

It is better to start late than never to start. You'll not be able to put together as much as someone who started earlier, but anything you save will be a help.

I don't think it matters so much WHERE you save as THAT you save.

I would suggest that you save in your name (rather than hers) so that if she doesn't go to college, there's no question that it's your money.

Not to sound negative, but straight As in 6th grade is a long, long way from earning a scholarship, and full-ride scholarships are exceedingly rare. Encourage her academically, push her to apply for scholarships, but SAVE too. Never assume that a child'll be fortunate enough to earn a scholarship.

Will you qualify for financial aid? Do a quick google search for a FAFSA estimator, and that'll give you an idea of what you might realistically expect.

Also, when the time comes, remember that it's perfectly fair to say to her, "This is what I can spend out of pocket. Look into scholarships, but also consider going somewhere close enough to live at home."

 

[Disneyliscious]

Also, when the time comes, remember that it's perfectly fair to say to her, "This is what I can spend out of pocket. Look into scholarships, but also consider going somewhere close enough to live at home."

Best advice Ive seen in a while. In the end its not about going to the most prestigious schools. In college you choose to learn what you want to learn and you can subsidize any courses with your local library or the internet. If you want to learn it, the information is out there and often its free or costs very little.

 

[mrsklamc]

Might I suggest Upromise.com? It is SUPER easy to save money there. Their coupons as the best! You select what coupons you want, scan your Kroger (or grocer) card and instead of taking the coupon amount off your bill it goes directly into your Upromise account. You can also get cash back from purchasing online at thousands of places....anywhere from 1%-15% of your purchase goes back into your Upromise account. Im a very casual online shopper but I easily get a few hundred dollars a year in my UPromise account. It works for dining as well.

You can also get friends and family to easily have their savings put into your account as well. Just add their cards to your list. If she didnt go to college, once your account reaches $250 you can cash it out and spend it on whatever.

Cant beat it!!

I used upromise for years until I realized they usually give one of the lowest percentages of cash back for the online shopping sites. Ebates, shopaathome, even sunshine rewards, will usually give you more $ back.

 

[crisi]

One of the wise people on this board (Mrs. Pete?) said something along the lines of "when you get the expected family contribution back from the FAFSA and its $10k....the government doesn't expect you to have $10k a year available - they figure you've been saving since they were little and have $10k per year saved."

Save now. With current budgets I'd expect there to be a lot less money available in six years than there is now - and there isn't that much available now.

 

[traces7]

Thanks for all the advice everyone. We definitely don't max out on our 401k, so maybe I shouldn't even be worried about saving for DD's college. I think that's why I didn't do anything last time I thought about this. DH and I both put about 4% of our paycheck in our 401ks. Neither of us gets company match anymore. With paycuts and cut hours, etc., we probably won't increase this anytime soon. We're in our early 40's right now. So maybe I'll just keep doing what we're doing, putting a little in a special savings account when we can.

She might live at home and go to college too, we do have a college about 10 miles from here and another about 35 miles (UW Whitewater and UW Madison). I still may check into the 529 plan too. I do UPromise, but only with my grocery card, so I'm sure we haven't gotten much saved that way.

I'll also check into some of the other things mentioned. Glad we have a few years before we really have to worry about all this.

Thanks again!

 

[taximomfor4]

I don't know the best way to save for college, just wanted to say that we may have to pull the plug on dd attending even the state college. With the cheapest room/board, etc, we'd have to pay out 40% of our annual take home pay AFTER she uses up her stafford loans. I'm simply shocked speechless. JUST missed Pell Grants, and just found out TODAY from the university that she'll get none of the university grants at ALL. $5500 in stafford loans for the year, and then nothing else.

I don't know what to tell her. The past few years has just been one thing after another, after another. We are still trying to land on our feet. I WISH we had a way to work this out, or that we'd been able to save more instead of just hanging on.

I say, pick a few ways to save and do them all. ANYTHING you save might help you avoid what we're having to do to dd now.

 

[nchulka]

I'm probably in the minority here but I'm not saving any money for my kids college. By the time they are ready for college they are adults and it's their responsibility. The thought of asking my parents to pay for my college never even crossed my mind. I thought of myself as an adult at 18 and worked and paid my own way. My husband did the same. There are schools out there that focus attention on the students working their way through. They charge no tuition but the students must all work on campus. I'll also encourage my DS to join the military, perhaps the air force and get his training there. I think paying for things for your adult children sets them up for failure and an attitude of entitlement. If you want it you work for or you don't get it, no one pays your way through life.

 

[mrsklamc]

Taximom-

Community college? College of the Ozarks (I think that's what it's called) is free if you can get in. Trade school, depending on what she wants to be.

 

[MrsPete]

One of the wise people on this board (Mrs. Pete?) said something along the lines of "when you get the expected family contribution back from the FAFSA and its $10k....the government doesn't expect you to have $10k a year available - they figure you've been saving since they were little and have $10k per year saved."

Yes, I have said that in the past. Essentially no one can pay for college out of THIS YEAR's paycheck, and the FAFSA people assume that you've anticipated college bills for 18 years and have been putting a little aside for all that time. Yes, we can complain about the EFC, but it's more important to know what they're going to expect and to be realistic about it.

Thanks for all the advice everyone. We definitely don't max out on our 401k, so maybe I shouldn't even be worried about saving for DD's college.

I know this goes against common wisdom, but if I were my age now and hadn't saved for either college OR retirement, I'd half-and-half it: I'd start saving aggressively, and I'd put half towards college and half towards retirement. Both are important goals, and I wouldn't sacrafice one for the other. If I took that route, I'd assume that my girls would end up with some loans (or a more lengthy college career), and I'd assume that I'd work a little longer than expected and travel a little less in retirement. Personal opinion.

I'm probably in the minority here but I'm not saving any money for my kids college. By the time they are ready for college they are adults and it's their responsibility.

My parents had that same thought process.

Yes, I made it through college -- back in the 80s, when it was more do-able to work your way through -- but I lived in places that weren't safe, I didn't always have adequate food or books for class, and I didn't finish in four years. At 18 just supporting yourself is enough -- after all, 18-year olds don't earn much above minimum wage; expecting an 18-year old to pay college tuition and juggle a full-time job/college classes is too much. If I'd had just a little help, I would've been so much better off: I would've been able to finish college sooner, start working in a professional job sooner, and I would've been safer. In all honesty, with some of the places I lived and worked, it's a miracle that I didn't fall victim to a horrible crime.

My girls won't have everything handed to them, but they also won't have to work as hard as I did. Helping kids pay for college isn't paying their way through life or setting them up for a life of expecting others to do for them -- it's giving them the tools to allow them to pay their own way through life.

 

[taximomfor4]

There are schools out there that focus attention on the students working their way through. They charge no tuition but the students must all work on campus. I'll also encourage my DS to join the military, perhaps the air force and get his training there. I think paying for things for your adult children sets them up for failure and an attitude of entitlement. If you want it you work for or you don't get it, no one pays your way through life.

can you let me know which colleges? DD has worked her way through her first year, at a community college. But for the degree she wants (a great job), she has to switch to somewhere with greater offerings in math, specifically. The State University 2.5 hours away had her degree, etc, and we thought would be cheapest. Not gonna happen.

 

[taximomfor4]

Taximom-

Community college? College of the Ozarks (I think that's what it's called) is free if you can get in. Trade school, depending on what she wants to be.

She wants to be an actuary. LOVES math.

 

[taximomfor4]

Yes, I have said that in the past. Essentially no one can pay for college out of THIS YEAR's paycheck, and the FAFSA people assume that you've anticipated college bills for 18 years and have been putting a little aside for all that time. Yes, we can complain about the EFC, but it's more important to know what they're going to expect and to be realistic about it.

We set it up so that we can meet our EFC (with even a little extra). But they want FOUR TIMES our EFC. Loans only cover 1/4 of it. I think I messed up, having dd do time at the Community College to save money. Made her ineligible for school grants all over the place.