Monday’s MST: College Fund

Monday’s Money Saving Tip: The Importance of a College Fund

Each week I’ve been writing a money saving tip - how you can save money on your monthly bills or the importance of saving your money (spending wisely).  This has been on my mind lately, so I’m hoping it will help someone who has been thinking of this.

First, let me start by explaining the importance of a college fund for your children.  This is strictly our (Ryan and I) opinion.  College is not really an option for our children, unless something comes up that legitimately would excuse them from going.  And I can’t really think of anything right now, so we’re planning on them going!  It’s a great experience for young kids, both academically and socially!  Some of my greatest memories are from college…oh the days!  So, your child turns 18 and heads off to college.  How in the world can an 18 year old, full time student pay $15,000-$40,000 a year to attend college?  They can’t.  So they simply have to take out loans.  Each year, they take out more loans in order to pay for college.  Sure, they may pay some of it, but they don’t come close to the full expense (even with financial aid).  Once your child graduates college, they are stuck with THOUSANDS of dollars in loans to pay off and they don’t even have a job, and let’s just hope you taught them not to get a credit card with even more debt.  There is so much change when you graduate college in regards to starting your life on your own.  I DO NOT want my child feeling like this when they graduate:

  Therefore, we feel that parents (who are now smart with money and make much more than a college student) should pay for college.  This can be a very overwhelming thought for parents also.  College is not cheap and seems to be getting more expensive by the DAY!  It’s almost ridiculous!  So how can you make it a little easier on yourself and feel good about sending your child off to college?  START A COLLEGE FUND AS SOON AS THE BABY POPS OUT OF MOMMY!  Dave Ramsey suggests setting your college fund up through an ESA (educational savings account) or a 529.  I don’t know much about a 529, since we use an ESA, so I’ll speak from ESA knowledge. 

ESA - You can give up to $2,000 a year per child if you make less than $200,000 annually!  That’s roughly $170 a month.  Even if you don’t put the max in, put whatever you can afford.  Every bit counts!  It grows tax-free.  It can transfer to another sibling before that child is 30 years old.  If you don’t use on children’s education, you will be taxed heavily on it when you take it out!  You might be asking “what if my child gets a scholarship or I don’t use all the money?”  There are very few scholarships that are completely FULL, plus you can transfer money to other siblings.  You can use this money on books, living, meal plans, etc…anything that deals with college.  Dave says not to discount your ESA because you think your child may get a scholarship.  You WILL use your college fund in some way or another.  If by some crazy reason, you don’t end up using it and want to pull it out, you will still make money, just not what you would if you had used it for college.

Having started this the second Beckham was born, I’m so much more at ease about his future, whether or not he gets a scholarship!  I value college highly and cannot wait for him to experience that milestone!  Sometimes I look at our retirement budget and wish we could use that money on other things, but I never look at our college fund and wish to use it elsewhere.  It’s no where near the amount that retirement is and it far outweighs the cons of saving each month!  Now only to anticipate where he might go to college?  Pony Up!

I do want to reiterate that this is OUR opinion on college and every parent has different feelings about it.  I respect each parents decision to raise their child.  That is the child God gave YOU for YOU to raise.  Hopefully, this helped anyone with kids or couples thinking about having kids.

And I want to add that I fully support working in college to make some spending money, but not at the expense of school.  I also fully support playing sports for that college as a job.  I played soccer in college, which paid for school, therefore that was my job!  I worked in the summers though for some spending money!

Here are also some links to Dave’s advice, which you know I value deeply!
ESA Question on radio
College is Expensive!  What’s Your Plan?