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!
Question - opinions wanted
September 18th, 2012 at 01:46 pm
September 18th, 2012 at 02:06 pm 1347977172
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.
September 18th, 2012 at 02:21 pm 1347978094
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.
September 18th, 2012 at 02:23 pm 1347978199
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.
September 18th, 2012 at 02:40 pm 1347979215
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.
September 18th, 2012 at 03:00 pm 1347980400
I didn't know colleges didn't count retirement savings....thanks for the info.
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.
September 18th, 2012 at 03:28 pm 1347982139
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?
September 18th, 2012 at 07:13 pm 1347995602
September 18th, 2012 at 07:41 pm 1347997291
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!! ;-)
September 18th, 2012 at 07:42 pm 1347997340
I agree -- almost word for word -- with ceejay!
September 18th, 2012 at 07:59 pm 1347998391
September 18th, 2012 at 08:32 pm 1348000379
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.
September 18th, 2012 at 08:35 pm 1348000506
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.
September 18th, 2012 at 09:16 pm 1348003014
I know it's hard, we wish we could save more for our kids' college funds.
September 18th, 2012 at 11:50 pm 1348012251
September 20th, 2012 at 04:57 pm 1348160240
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!
September 22nd, 2012 at 12:01 am 1348272107
Jerry
September 23rd, 2012 at 06:31 pm 1348425061