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Question - opinions wanted

September 18th, 2012 at 01:46 pm

We just recently fully funded our emergency fund. Six months of living expences. We were putting $1000/mo into this fund. I made mention to my husband that that the $1000/mo can now go to my oldest college fund. (He is a senior.) We currently have only $4500 in this account. He informed me that it should go into our 401K which now has only 5% going into it. I know that is low and should be at 15%, but I think we need to aggressively save for college expenses. (Our second child is a sophmore.) Expenses hould run $9000/semester for college. I'm freraking out as we don't take out loans for anything. Where is the money going to come from? Son is applying for schlorships, but that's not a sure thing.

If you need more information, ask away!

17 Responses to “Question - opinions wanted”

  1. creditcardfree Says:

    You can borrow for college, but not retirement. That is what financial gurus like to say!

    I understand you don't borrow for anything, so I would look at cash flowing any college expenses as they come. Don't invest any college savings in the stock market at this point. If you save, only save in a money market so you don't lose principal.

    Can the $1000 be divided between retirement and college? I think I'd be more likely to put the money into retirement and then look for other ways to look for cash for college. You are motivated so I'm sure there is other money available in the from of selling something, part time jobs/side gigs for all three of you, scholarships, grants, gifts from family. College can always be postponed or take less credit hours per semester.

  2. ceejay74 Says:

    If your retirement is underfunded, take care of that first. Son can pay off student loans; it's better than having to take care of you in retirement (or worrying about you living on meager means). Heck, YOU can help him pay off the loans with what you've got left over once you put your 15% to savings/retirement.

    Plus, lots of colleges give partial scholarships based on need. They don't count retirement savings when looking at how much money you have, but they do count college savings. So socking the money in retirement essentially takes it out of the equation when colleges are determining your need.

  3. Nika Says:

    I think it depends on how old you are and how much you already have in retirement, how close you are to paying off your mortgage.

    I disagree strongly about postponing childs college or taking less than full time. That usually does not end well.

    You will help as much as you can (living at home and commuting to college may be a cheaper way to do it) and if your child has to take out some loans, not the end of the world, and you can help with them later. As long as he understands well how loans work and what it would be like paying them off.

  4. Momma23 Says:

    Thanks for the quick reply CCF. The money could be divided, tho don't know if hubby would go for that. He is wanting to follow Dave's plan, where I think we can divert from that.

    Son already has a part-time job. He pays his truck note (3%) himself, and pays for his own gas. He took a loan out with my mother and I made an agreement with him if he makes 2 payments or more a month, I would match him. He is motivated. He wants to sell his dirtbike to pay for his truck and hopes to have it paid for by the end of the year. He also puts 10% of each paycheck aside to invest in 401K as soon as he is eliglble. (With his current employer, he is not old enough.) He is saving $50/ mo. for Christmas too.

    My mother has offered to help with college expenses but this is my kid and I take responsibiliy for him. I don't think I could accept money without earning it. Where there is a will, there is a way....just need to figure that one out. lol.

    I am making homecoming mums for the big game and have several orders. I can add that money to the college fund. Snowflakes do add up.

  5. Momma23 Says:

    CJ...our retirement is underfunded....that's why hubby want's to do it his way, but I am anxious about college costs. I don't want my son to have to pay for college. That is my job. I don't want him to incur any debt. I figured it is only $200/mo difference between the additional 10% and the $1000, so not much to add there.

    I didn't know colleges didn't count retirement savings....thanks for the info. Smile

    Nika...We only have around $90,000 in retirement and owe about $60,000 on our house.

    We will not postpone his education or have him take fewer hours. He is motivated and don't want him to detur from that.

  6. Petunia 100 Says:

    Your son doesn't have to wait to be eligible for his employer's 401k in order to put the money earmarked for retirement to work. He can open an IRA right now.

    I think you should bump up your retirement contributions to at least 10% before you save for college. Perhaps your dh would agree to some sort of compromise? Some of the 1k for your retirement, some of it for son's college?

  7. crazyliblady Says:

    I agree with creditcardfree. You can't buy for retirement and you don't want to be collecting food stamps during retirement. Your children could get loans and scholarships, not to mention work study.

  8. BuckyBadger Says:

    I agree with your husband. Retirement before college.

    The thing is, you can never get back this tax advantaged space. If you want to help pay for college for your kids, let them take out loans for whatever you can't cashflow and they can't fund themselves. (No reason they can't work a bit, too. On campus jobs or a job during the summer won't kill them.)

    There's no reason you can't help them pay back those loans over a short number of years after school.

    I knoe it's been said a million times, but it bears repeating. You can't get loans for retirement. They won't appreciate your sacrifices when you're old and gray and need to move in with them because you've spent all your retirement funds!! ;-)

  9. BuckyBadger Says:

    I replied before reading all the responses.

    I agree -- almost word for word -- with ceejay!

  10. PNW Mom Says:

    I agree too with all the previous posters. I personally don't think it is a parent's job to pay for college, BUT......I also think it is absolutely great if you can and want to, but your retirement definately has to come first. Good luck!

  11. MonkeyMama Says:

    Agreed with PNW. No one in my family has had a parent pay for college. Contrary to popular belief, this was a good lesson in life skills, working hard, and getting good value in college choices. Obviously community college was a choice to that end. (No loans were taken).

    Reconsider your mother's offer. IF she can't afford it, I totally understand your sentiment. But otherwise, it seems to me that you are just putting way too much pressure on yourself. My in-laws *really* want to help pay for college, and I see no reason to say no to that. Between that and our kids being able-bodied to work, I have put college savings on the bottom of our financial priorities. & trust me, our kids have probably 10 times the college opportunities that we or our parents had. I am not worried about them in the least.

    Just think about it - what are you going to do when your retirement falls short? Ask your kids for money? Your mom? It's infinitely less financial pressure to have them help on the college side, while you focus on your retirement. I know way too many people whose parents went bankrupt over college. My parents didn't help me that much financially when I was in college, but they are *never* going to ask me for money. This is really what it all boils down to.

  12. snafu Says:

    I wonder why you believe parents need to fund University for their children? Many of us feel it's son's responsibility to fund his university education and his future as his 1st step towards being an adult. There are thousands and thousands of scholarship, grants and awards available and he should be starting the research process. DS can work summers to pay some expenses. We who teach post secondary believe our students take their responsibilities more seriously if they 'have skin in the game' working summers and part time. Going through the process of seeking student loans, learning interest rates and fees plus getting his head around the consequences of major borrowing is one more life's lesson.

    Since 1st year is 'General Studies' a significant number of students can take those courses at a Community College having first verified those courses are fully transferable to chosen University. Cost if living at home are more than halved.

    Finally, there is always the opportunity for parents and grandmother to step in and help pay off student loans after graduation. I agree with DH & other posters who point out how important it is to fully fund retirement. Kep in mind your generosity can negatively affect DS's eligibility for some scholarships.

  13. texasdisneygirl Says:

    Definitely retirement!

    I know it's hard, we wish we could save more for our kids' college funds.

  14. wowitsawonderfullife Says:

    If your Mom wants to contribute then I would definitely take her up on her generous offer. My son just graduated and it was more than $82K. We have a pension plan so that makes a difference. My son worked for a co-op year and contributed about $20K overall. But it was a sacrifice and I would do it again in a heart beat. My parents contributed about $500 to my education and I finished with a small loan. My son was going to have a small loan of about $3,000 but he managed to suspend almost all spending for the last few months and graduated debt free. I would haul rocks to pay for his education. And yippee, another son ready to go in two years and we've saved $29K.

  15. Momma23 Says:

    Looks like I lost out on this one. I will be putting an additional 10% in the Roth in addition to the 5% that is already going into the 401K.

    Had a serious talk with my son last night and told him he needs to be more proactive in finding money for college...schlarships, grants, etc. He agreed and will start this week.

    I do agree that son can contribute to his schooling but he won't be able to work full time if he is taking 12-18 hrs/semester...

    There are many things my DH and I have done to prepare him financially for his adult life. He has a good head on his shoulders and is very mature for his age money-wise.

    Snafu, how can our generosity negitively affect schlarship eleigiblity? Hopefully we just have to pick up the slack after schlorships, grants, and his contributions.

    Wowitsawonderfullife....I would haul rocks also!

  16. Jerry Says:

    The question that this leads to in my mind is how many schools your son is considering? Is there only one school that will work for his chosen major? If he can find a selection of schools that will accept him, then you can play the financial aid offers against each other to get the best deal. There are plenty of ways that he can get through, in addition to grants and scholarships, if he is willing to do Work-Study through the school, etc. Good luck! It is a big deal, definitely...
    Jerry

  17. PatientSaver Says:

    I'll answer for snafu, since she hasn't done so yet. Some scholarships are needs-based as well as based on how good the student is doing, so if you've already got a bucketful of money, that in itself could rule you out becus your perceived "need" isn't as great as someone who has lower savings.

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