<p>A while ago I posted some questions about how much to save for college. After much thought and careful saving, it looks like I can set aside $45,000 prior for Baby Girl. </p>
<p>I ran the calculations, and if the money grows at 6.7% in the stock market and if the cost of college increases at 5% (both numbers come 20 years historical performance of both college prices and stock market valuations), it should be enough to pay 75% of Baby Girl’s college education at a state university in the Western United States. </p>
<p>For reference, I’m expecting the savings to increase to $144,000 by the time she graduates, while the cost of college to increase to $192,000.</p>
<p>I’m not planning on paying for out of state tuition, and at this point, not planning on paying for a private school education. The remaining 25% she’ll need to come up with through scholarships or her own savings, as I feel it’s important kids have some skin in the game as well.</p>
<p>Your opinions…is $45,000 today sufficient for college in 18 - 20 years?</p>
$45k is quite a chunk of money to set aside for something that may not even happen. IMHO, it needs to be weighed against your own savings and goals. Do you have enough for your retirement and your future? If so, then you’re much, much better off than most.</p>
<p>There will likely be financing options for your kid when she is ready to attend college. No such safety net exists for your future retirement and medical costs. </p>
<p>That’s my $0.02…it may sound selfish but you need to look out for your own financial security first.</p>
<p>It obviously depends on the rate of return and the rate of increase of tuition, both of which are not very predictable. Rate of tuition increase has been outpacing inflation by a big margin the last 20+ years, and will it continue to do so in the future? I don’t think that is sustainable but I don’t know. In any case, 45k is a good start and you may need to adjust things along the way, but I think you are better off than maybe about 99% of the people already.</p>
<p>Rather an odd sentiment. Most responsible parents plan for their children’s future, and the earlier the better. I started immediately upon the birth of each child and now my oldest is a college freshman. Saving for college was one of the smartest things I’ve done. </p>
<p>My advice is to assume a lower rate of return - 5% is probably more realistic. Why wouldn’t you invest a reasonable amount annually, rather than give one lump sum? It’s difficult to say if you’ve saved “enough.” What is enough? It’s generally better to save more than you think you need.</p>
<p>$45k is probably a good place to start today if you can put it aside today without much pain. Don’t ignore it, however, as previous posters have noted, recent cost increases have outpaced inflation and recent investment performance. You are not taking taxes into account on your assumed return, so I assume you will cover the income from your pocket and let this account grow. </p>
<p>FYI - when my ‘baby girl’ was born, we assumed $30k/year would be enough for private college costs. That’s just over what we estimate in-state costs will be at Rutgers next year.</p>
<p>The rule of thumb I’ve heard recently is that parents of babies born this year should expect to pay about 3 times the amount of the current all-in-cost for an education. Be sure you are taking into account tuition, room, board, books, fees, and incidentals when you budget. Also, don’t forget that her school will probably continue for 4 years or more. This whole amount won’t come due in one day and you may be able to continue to save (or pay out of earnings) during those years.</p>
<p>Finally, there is Bill Gates’ recent comment to consider, to the effect that in 20 years colleges may obsolete because best-of-the-best lectures will be available on line, better than any one school can offer. Personally, I think there is far more benefit from a good college education than just lectures. But, his overall point is valid - your daughter may well have affordable options to get a quality education, beyond what is currently available.</p>
<p>It’s impossible to do money calculations this far out. You don’t know how much tuition is going to rise, nor what returns you’ll get in the stock market. That said, saving is better than not saving.</p>
<p>My advice, if you’ve got the 45K, is to put it into a 509 plan (research these–some are much better run than others) or possibly into a prepaid tuition voucher program if your state runs one of those. The 509 offers more flexibility, the prepaid plans offer greater certainty. This money must be spent on education expenses only, but OTOH it will grow tax-free. If you have more than one kid, and only one of them ends up going to college, you can shift the money from one to other other without penalty, which of course reduces your risk. If you don’t plan to have more than one kid, put only part of your money into the education-only funds and keep part of it in a regular, “use-it-for-anything” investment account. As your kid grows up, you will have more sense of her likely trajectory and you will be able to figure out more accurately how much money you will need. At that point you may want to shift more into the 509 account.</p>
<p>Do this ONLY if you already have an emergency fund of at least 6 months stashed away in your own name, AND if your retirement savings are on track. If they aren’t, use some or all of the 45K for those purposes first. You can save for college in dribs and drabs; most 509 plans allow you to sign up for a automatic monthly deduction plan where a couple hundred dollars is invested every month. I coordinate this deduction with the arrival of my paycheck, so I never see the money and thus never miss it.</p>
<p>We had about $220K in the 529 plan for my DD, we thought it would be ample even she got into the most expensive private school in the country. We felt safe until the stock crash of 2008, the fund, which was invested aggresively dropped more than 50% to around $100K, even with the current recovery, it stands at $130K and the kid is attending the most expensive school at 60K/year now.</p>
<p>45K is a great start, but you will need to add to it on a yearly basis. In twenty years, the cost of private college education may be as much as 200K/year. In 1972, mine was 10K/year and it was private school, look what happens to cost now!</p>
<p>There are plenty of college calculators out there, and plenty of guesses as to growth of various investments and increase in college costs. I guess the real answer is what’s the alternative? Both in terms of what you would do with the money were you not saving for a child’s education and is there more money around to sock away?</p>
<p>As someone said earlier, I don’t think you can take any investments as static. You’ve got a very nice nest egg, and it will help enormously. But you can’t know the strengths and weaknesses of your child at this point. You may want to reconsider all of your assumptions at some point. So don’t lock yourself into a position where you can’t change gears. And expect that you’ll need to put some more money away at some point or other. It sounds like your financial planning will let you do that down the road.</p>
<p>Cost of attending NC Chapel Hill is 20k per year, so that´s 80K for 4 years. I don´t see how 45k is going to cover 75% of even of today´s costs. Tuition is only 5K per year, and rest of it is for books, room&board, travel, fees. I don´t think one could find tuition lower than 5K in any other state.</p>
<p>Obviously OP has a view on what he is willing to pay for his kid´s education. It would be a shame if he should ever be relocated to a state where the ISS isn´t a good fit for his kid. </p>
<p>I am obviously passing a judgement here, but I would think a parent´s responsibility is to provide as many options to his/her kid. There is no telling what his daughter is going to be like at 18. It is just very strange to me that OP is limiting what he is willing to do for his daughter, even before he has met her.</p>
<p>45,000 is a great start! It may or may not be enough, so you will need to look at adjustments along the way. Also remember that whatever savings/investment vehicle you put it in now, you will also need to adjust it to a lower-rate/“safer” investment as college draws near.</p>
<p>We put a large amount of money into a 529 plan for our kids several years ago, and lost 1/3 of it during the big crash a few years ago, even though we thought it WAS in “safe” investment options. So you just never know what’s going to happen, but you are off to a great start. Kudos to you for planning ahead!</p>
<p>Certainly different parents have different views on in state vs out of state or private versus public education. Since both my wife and I were educated at a run of the mill state school (that we both loved), I feel that state education is an excellent value. I’ve attended two different state schools, three community colleges, and one private college so I have a good perspective at the differences among the education. Based on my experiences, a state education will be more satisfactory for our daughter.</p>
<p>Spending any more on private educations means that we’d have to sacrifice opportunities today. And while college is important, so are family vacations, trips to Disney World, summer camps, and a lot of other things. I don’t want to sacrifice too much today just so I can fully fund private school when there are really great state school options.</p>
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<p>I forgot to mention that 1/4 of the money is in a state guaranteed tuition plan and the remaining 3/4 is in a 529.</p>
<p>Loans and summer job earnings can barely cover 25% of in-state costs <em>now</em>, in many states. If college costs keep increasing the way they have for the last 20 years (particularly at state schools, where state funding seems to be perpetually cut), your kid may not realistically be able to come up with 25%. There is no guarantee your kid will get scholarships or other merit money.</p>
<p>I think it is a little strange that you have decided 18 years in advance that an in-state public university is the best and only option for your child.</p>
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I think you can withdraw it at any time, but you will pay taxes and a 10% penalty on the earnings. If it’s been more than a few years, the tax-free compounding of earnings should make up for the penalty</p>
<p>The planning is admirable. It’s great that you have $45K already set aside. My question is, though, why do you need to decide at this moment that it’s only going to be a state university, and / or only going to be in the Western US? </p>
<p>And my bigger question is, why do you have to explicitly save “for college”? We never saved for college explicitly – as in over here is a college fund. We just saved and invested to the point where we could be comfortable pulling from the fund for college. But we never designated any specific pot of money for college. It’s all just savings, IMO.</p>
<p>Compare to today’s fees, it is laughable that the article is *****ing about the cost of $320/year vs $84/year attending University of California in 1970(not including room and board).</p>
<p>Colleges on the east coast are much more expensive than colleges in the west, in large part that easterners tend to have much higher incomes. It’s not practical for me to save up enough to pay for NYU on a western state salary. </p>
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<p>I’m expecting the money that is saved up will increase in value by about $100,000 in the next 18 years. Saving it up “for college” in a special account means that I won’t pay taxes on the $100,000. If it’s just saved up in general, then I’d pay taxes on it. It will save me about $30,000.</p>