I have three sons, ages 14 (freshman), 13 (8th grade) and 10 (5th grade). To be honest, all of them are students “in the middle” – not superstars at their schools. My oldest has ADHD and some mild learning disabilities.
Goal #1 is to figure out how to help them become good students and survive school.
Then, I wonder about college, but it seems so far off. Will they even go? We are assuming they will go, probably to a state school. Everything seems very competitive. Our flagship school rejects top students. But there is a place for them out there somewhere and somewhere where they can get a meaningful and productive education. Where it is – I don’t know.
We had been saving for them in 529’s and Coverdells. Then I got spooked that the money is not so flexible. What if the youngest wants to go in the military? What if oldest doesn’t make it through college? I have many worries. I would like to assume that if we have the savings ready for them, they can get admitted to good schools (not necessarily prestigious schools) and start to make their own way.
I just got a new job and would like to ramp up the college savings. I love the control of selecting investments in the Coverdells. But maybe we should take the state tax deduction advantages of the 529s, or just keep investing in our taxable account for maximum life flexibility.
We have maybe 1/2 of a 4 year in-state college tuition saved for our oldest, and the younger ones are less and less, by their age.
Any suggestions or hand holding that it is all going to be OK? Thank you.
Save like they are going to go. It’s a good time to think about what your family can “comfortably” afford. If state schools are more of a fit financially, save for that. You can deal with other options if/when the time comes. (sometimes private schools with aid can end up being = to state school prices)
Second important piece of advice to start adding into conversations now: never just have one school on a list. Both in terms of cost and ease of acceptance. Families are all over the board on this but IMO a student should have at least 3 schools they are willing to be happy with. A safety, a match, a reach. Maybe even 2 safeties or matches. Bad idea to fall in love with only one!
I don’t know if my kids are the kind of kids that will fall in love with any school, but we’ll find out!
@ScouterMomof3 your kids are pretty young yet for seeing themselves in/at a college or having a course of future study. It is NOT however too early to save for their future! Whether that future is college, a trade, a car needed to get to a job, etc.
If your own retirement plans are maxxed out, then feel free to save your kids’ college money any way you see fit. It really, truly, is OK to just stash it in a shoebox under the bed if that is what works for you. Don’t feel bad about prefering to have your money in more flexible investments than 529s and Coverdells.
We have just one kid so a 529 was a risky option. We also weren’t able to save for college until very late in the game. I put it all into laddered CDs set to mature at the end of July and December just in time to pay for the next semester.
I’m very risk adverse, especially in investing for my kids educations after being badly burned o. Buying one stock which went straight up and then straight down.
We bought our kids zero coupon bonds in our state. It was 9% interesado it would be worth 4x the face value upon maturity. We got them just after kids were born and set them to mature when the kids turned 18. It worked and gave us some peace of mind.
We used 529’s for our kids, and it has worked out well. I like the fact that someone other than me thinks about how funds are invested, and the investments get more conservative as the child gets closer to university age. There is still a need to spend a bit of money outside of the 529, such as for funding our trips to visit our kids.
One small issue is that one of our daughters picked a very good but very economical school and then got a very good merit based scholarship. Due to this she is not going to use up her 529 before graduating. This is however not that bad in the list of problems that a parent has to deal with, and it is permissible to use a 529 for siblings or other close relatives.
“Everything seems very competitive.”
There are a very large number of very good universities.
In terms of safeties vs matches vs reaches, my take on this is that every student needs at least two safeties. If the safeties are good enough, then everything else is optional. For some students their in-state flagship is both a safety and a great match. This can vary from student to student.
I don’t think you can buy a Muni Bond for 9% Yield any more.
https://fmbnd.investor.trading2.fast-trade.com/fmsbonds/bondsearch.do?bondfinder=all&listOfferings.x=true&_ga=2.209590162.1056929723.1567703947-735333339.1567703947
In the above offering, the best yield is around 6.5% from a low rated bond from MI, it might be for Detroit, a very risky proposition.
Anyway, it’s a bit too late for your three kids. In four years, you need to shell out about a total of $120K, assuming $10K out of pocket per year per kid(Room and Board only, free tuition). Depends on your income that figure could be more or less. Even if you can find something paying 9%, you need around 500K to invest. Right now, there are some taxable ETFs that will pay something like 9%, starting with $10K/mo into a 529 plan probably is the best policy.
I disagree completely that it is too late to save for my 3 kids. My oldest is 4 years from college, middle son is 5 years from college and the youngest is 7 years from college. We can pack away a lot of savings in those years. and cashflow some of it while they are in school, too.
“We had been saving for them in 529’s and Coverdells. Then I got spooked that the money is not so flexible. What if the youngest wants to go in the military? What if oldest doesn’t make it through college? I have many worries.”
Remember that in a 529 plan you can get 100% of your principal back without tax or penalty to use any way you want to, whether for college or not.
Any GAINS in the 529 plan will be federally taxable and a 10% penalty if not used for qualified educational expenses but you still will be ahead in the end. Some states allowed you to take a deduction for some of your contributions in the 529. Double check your plan.
In general, you are worrying about a non-issue. Job well done thinking about and saving for your kids college education.