"Terrible market crash in 2000. But that only affected our tax-deferred retirement funds (401k) which weren’t relevant to current spending.
Best advice to parents is that in the last 2-3 years prior to when your kids will enter college you should have as much as possible of the needed cash in very safe mode (mainly savings and fixed investment). We had money in US Savings bonds and cash. "
Ironically enough, we actually used 401k to fund D’s medical school. 401k may also be in very safe mode as well as you may mix them in accounts with various degree of risk. For 2 working parents it makes sense to put as much as possible into 401k especially if employer matching is very good. It makes much more sense than any other type of savings, since no other type of savings will have this incredible boost like 401k has in form of employer contributions. We are withdrawing because we can do it without a fine (we are old). But others who are younger can borrow from it and pay yourself back. I know that some people at my work have borrowed from 401k to buy a better house.
@SouthFloridaMom9 and @DarkStar904 My son chose his safety (Penn State: $00.00) in 2006 rather than Cornell ($190,000).
Just got his masters from Georgia Tech ($00.00) paid for by his company.
Just pick a college your kid can succeed in and be happy at. It all works out.
Thank goodness we didn’t go into debt. We have had some challenges since then and no debt for anyone was a wonderful gift for us all.
Very good advice. Other than the tippy-toppy schools, there is remarkably little difference in outcomes once you adjust for major. For many people, the cheapest school is the best school.
That’s awesome @sax. It’s true, you just never know what will happen.
Honestly we’d rather give our son some cash to start a business or put a down payment on a house, than hand it over to a school in the prayer that he will receive ROI someday.
Obviously you want them to go to a decent school . . . I’m not comparing a for-profit scam school with GT.
@sax – usually when I see a lot of zero’s ("$000) next to a school, I get concerned. However, in your case, the zeros next to PSU and GT look well within budget – HA !!
@SouthFloridaMom9 - we’re actually offering our son a lump sum which would result in cash for grad school, a start-up business, etc. (as you mentioned above) if he chooses the more affordable school.
– for the record, we moved our 401k to a more conservative investment plan over the weekend but I can’t restrain myself from clicking on the Dow link today.
We plan on using our Florida Prepaid plan (which isn’t linked to the stock market) and normal savings, so we (hopefully) will be fine. In fact, if we go through another 2008 style recession, causing the state to cut funding to the colleges, who would then compensate by raise tuition rates, the prepaid plan would cover the difference. The prepaid plans have some negatives, but they are great at dealing with market down cycles.
GT gets about 120 to 150 OOS students a year from Florida, the most from any one state. That’s not a lot when you consider Florida is the 3rd most populous state and it’s right next door. When I was going to UF in the 80’s, my cousin was going to Tech (OOS). When I learned how much he paid a quarter for tuition, I was shocked! It was much more than I paid a semester for tuition, rent, food, books, etc.
Of course, now I would happily pay those 1980’s GT OOS rates. :-bd
@DarkStar904 we did the same for our son, letting him know the college fund we had saved would still be his for other serious purposes after college if he pursued merit aid schools and chose an affordable option (which he did). He is very happy with his choice and likes the idea of having some funding tucked away for future planning.
So if the market continues to drop it will affect our retirement investments, but not his college funding.
@Gator88NE – I can relate. My son is not a big fan of Gov Rick Scott since he won’t raise the tuition at UF. This makes the tuition gap even greater on a year-by-year basis – HA !!
Anyway, the market dropped 249 points today. I feel bad for the residents of Houston who are definitely in for a bumpy road ahead.
My kids are both set on our state schools so it is unlikely to matter except that other kids who have the statistics to get into more selective expensive schools may be forced to choose the in state option making it more difficult for my kids to make the cut. Although there will probably be an equal amount of high stats kids who would have gone to state school that will have to stay closer to home so maybe it will all balance out. Either way, I feel for people whose college savings or jobs are in jeopardy.
Just had our financial planner do a thorough analysis of where our college funds are held in December. Her conclusion was that we have enough in “safe” places (bonds, CDs, etc) and enough still in the market to keep up with inflation and ride out most situations. She did point out that we have more flexibility since we are at the beginning of an 8-9 year period of paying for college. We will lose some of that flexibility as we spend down those funds and the time horizon shortens. We built some of that flexibility into our overall plan after watching what happened to others in 2008. Hopefully lots of others did the same.
Our youngest is a junior in college, so we are at the end. We are too heavily invested in stocks, as CheeringSection warns above. But we paid for winter quarter before the tumble in stocks, so we only have 4 more quarters left. My husband and I have agreed to switch out some of our cash to tuition payments and take her stock investments. One good thing is that at this late stage, she is in an apartment, not a dorm, so the monthly payments are spread out, instead of being due all at the beginning of the quarter.
No changes here. Isn’t that the purpose of having a plan, an approach to managing your finances and investments? Business as usual. The market goes up, the market goes down. Have an allocation and automatic investment plan, set it and forget it (with the exception of quarterly reviews). You buy high, you buy low - dollar cost averaging. There are so many more important things to be concerned with than the snapshot point in time picture of one’s net worth.
No change. My retirement is more in stocks than I’d prefer, but tuition for the first couple of years is in cash, except for one small (~5K) 529 account. That’s “first couple of years” in a worst-case scenario, too, with no merit. Depending on where he goes, we might need to use that, or might not. Still waiting on 3 decisions.
I’m a little more concerned about the other side of the sandwich. Pretty sure my dad’s nearing the end of his retirement funds, but not the end of his life. That may be a bigger worry than tuition, but we’ll see how it goes. I’m glad he’s healthy, and I figure we can make it work somehow.
Back in 2000, when the market crashed, H went around telling folks we’d have to stop reading to our pre-school kids since it wouldn’t matter, we’d never be able to afford sending them to college.
A more salient question is how FA would change in a market crash. Universities will have lower donations, fewer assets, and (presumably) would have to offer higher levels of FA to families who’s assets have dropped which when combined would create a cash squeeze for most of them.
No change for us. We have 2 graduating in May. We paid their tuition NOT using 529 money, hoping the market gets better by the end of the year. If not, we will take it out anyway. Have one sophomore in college too. We may save his 529 money for other years.
