How much would you budget for college for a kid?
I know there's no "one answer fits all" - and that the range can be wide-varying (from community college costs all the way to ivy-league colleges, but I'm probably somewhere in middle between those extreme points).
How much would you try to save up for college costs for when your kid grows up? If you recently spent money for college costs for a kid, how much did you find yourself paying out of pocket for a year?
Am just looking for some rough ideas here before trying to set up a budget goal for that.
I'm sure it varies widely -- there's not going to be a "one size fits all" solution. It'll depend on what college your kid attends, where you live (in state vs. out of state colleges), the local area, if your kid is living on or off campus, if you are paying just for education expenses and not general living expenses, how frugal they are being, whether they have a job or not, etc, etc.
I went the community college route and then to a relatively cheap in-state school. I think I spent roughly $1000-$2000/semester on education expenses at my community college, and roughly $7000-8000/semester at my final school, doing about three years at each (working nearly full time while going to school full time, supporting myself entirely). That was just for education only -- living expenses were separate and a little hard to judge. I graduated in 2012, so this isn't super recent data, just one data point.
With the way prices are going, realistically, the more you save, the better.Reply
You don't say what ages your kids are. That will also affect how much you might need to save. Are they babies and you have 18 years to save? Or are they 14 and the time is feeling imminent?
If you have almost 2 decades, then who knows what college costs will even be like then. Maybe Bernie gets elected. Maybe we all have Google chips implanted in our brains by then and we don't even need college anymore - haha.
But more seriously. Our daughter is in college right now - actually studying abroad at the moment. We are paying ~$65,000 out of pocket each year. She got into an Ivy and wanted to go, so we weren't going to deny her that opportunity if we could help it. She does also take the max Federal loan that she can get, which increases with each rising year (this year it was $7500). When she was little, we never dreamed that we would be able to afford what we are affording now. So, things can change, depending on how much time you have.
Many years ago, we set her up with a UTMA/UGMA account. We didn't know about 529s back then, but you should look into those as well. We tried to save up to the UGMA limit each year (whatever they were - I don't recall), but I know we rarely met it and life kept getting in the way of saving.
It's definitely hard to predict because there are so many variables. Also remember the advice: Your kids can borrow for college. You can't borrow for retirement. So don't forget yourself in this big equation.Reply
A couple of thoughts. 1) as you get into the high school years and it is time to start managing everyone's expectations, don't write off a school just based on the published tuition costs. Colleges and universities have sticker prices, but the important thing to consider is what percentage of students actually pay sticker price? There are universities that have a really high sticker price because international students and wealthy people are going to pay that no matter what and they use that income to leverage grants and aid packages for the rest of the students. At my alma mater, I would guess that maybe 25% (if that) pay the sticker price tuition and everyone else gets grants, scholarships, and aid and come out with minimal student loan debt. 2) Speaking of debt, always remember: you can take out a loan for college but you cannot take out a loan for retirement so don't shortchange your future while planning for your kids.Reply
I have two kids, the oldest will be a senior in high school in a few months and the second kid will be a sophomore in high school. Hopefully, we will be paying our first college tuition bill a year from now.
DH and made it our goal to save enough money to send them to our state university (which is not an inexpensive state university) for four years. Instate tuition is $35K/year. We don't see the ROI for an expensive degree based upon our experience (I have fancy expensive degrees but have poor earning power, DH has two cheap degrees, he makes much more money than I). We also assume our kids will either need graduate work, internship experience , or a back up vocational training which will cost money too. Heck, I'd rather give our kids the $ difference between state and expensive school to start their own business or as a down payment on a house. Our number one goal is that they do not have student debt. Second goal is that they launch and set up their own household - they aren't living with us till they are 30.
We started saving when they were born with a modest ($50-100) monthly savings into a 529 account and when we could afford it, we bumped up our monthly contributions to $250. Some years were very lean years and our contributions dropped to $250/quarter. Some years were better and we sank DH's annual bonuses in the 529s. We now have saved enough for 4 years at our state U: $140K per kid. We know we won't qualify for any need based aid given DH's income levels. There will be no merit based aid for Kid #1, but maybe for Kid #2.
We also make our kids work at the local grocery store starting when they are 16.5 years old but those earnings go to pay their car insurance, gas and their annual ROTH IRA contribution. But their earnings are not earmarked for college.
Our state higher education system has a great deal for residents: if you go to any of the community colleges (CC) for 2 years and maintain a certain GPA and take the required courses, you automatically transfer into our state's 4-year university, having spent roughly 1/2 of the tuition costs for those first 2 years. There are some restrictions: some of the majors can't be completed with any course work at the CC level. However, many of my friends with kids already graduated from high school have gone this route: sending their kid to our local CC, having them live at home and then have them transfer into the 4 year state U after one or two years at the CC level. The only down side from my perspective is that our son will live at home and he dearly needs to move out for a dose of reality!
Our younger son is academically gifted and I suspect that he would do better a small liberal arts college (like I went to) where he will get customized care and hand holding by the staff. However, is that really worth double the price of our state school? Given that he's leaning towards non-lucrative fields of study (the liberal arts), I don't think so. But we haven't crossed that bridge yet as he's only 16.
One other thing to note: back when DH and I started saving for college 18 years ago, we had big dreams for our kiddos and their educational attainment. Both DH and I have masters degrees in our fields. Then our kids grew up and became people who do not necessarily have the same hopes and dreams that we have for them. Our eldest son does not apply himself in school and hasn't since grade 4. It's crushing to watch potential go to waste. But it's his life and it's all the more reason to not pay a high price for his college credits till he gets his butt in gear. You can't know what kind of kiddo you have when they are a baby. You can do all the right things and save the cash but what do you do if your kid squanders your precious savings! I know two parents who paid for college for year #1 only to have kid fail some or all their courses. So they each made their kid take out loans for year 2 with an agreement that parents would pay the loan in full if a certain GPA was achieved. Both kiddos still failed and now have student debt. One of these kids has $60K in debt from going to a state U. He does not have a degree in anything, is waiting tables, and struggling to pay his monthly loan payments. These are highly educated parents with all the best supports for their kids. You just don't know what the future will bring. Our Plan B if this happens to our underachieving son is to cut him off if he fails and make him work for a year until he's serious about school. But I don't know if that will work.Reply
We live in Canada and our son is going into his 3rd year at a highly-rated smaller university in a small city about 3 hours from home. We pay about $19000 per year for his education, books and living expenses. We had been saving since he was an infant and took advantage of the federal government's RESP program that contributes about 20% of what we put in. We expect him to work in the summer to pay for his own clothes, car insurance and repairs and gas. We'll have said that we would help the kids with their first degree and they'll take care of their graduate degrees.
Our twins are going into Grade 12 this year, so we'll have 3 in university at the same time. Very thankful that we can help them get a good education.Reply
I'm a stepmom to a 14-year-old and a 12-year-old. Unfortunately, life did not afford my husband the luxury to save for his kids' college. I think there may be some money set aside by one of the grandparents, but I'm not sure.
DSS 14 is fairly academically gifted, and should receive scholarships or grants of some kind if he applies himself. (We start high school in three weeks!) Out the four parents, I am the one who is most gifted with research and academics in general, so I'm sure SS and I will start researching options in the next couple of years. Local community college is an option we will explore if we can't locate scholarships, though I feel like he would thrive at a four-year school.
DSD 12 is a different story. She has some learning difficulties and loves music. She has a dream to be on Broadway, but currently believes she is being held back because we won't provide singing and dancing lessons. Heh....12-year-olds. She will most likely need to start at community college and work until she figures out what she would like to do.
Thankfully, our coastal area has a plethora of summer jobs that are good for padding a young person's pockets, from setting up beach chairs to waiting tables at one of our many restaurants. My plan for these kids is to help set them up for a good future. I know we may not be able to completely avoid student loan debt, but hopefully we will be able to give them some tools, teach them to earn AND save money. If they can learn these lessons, in addition to school work, that will help them find success.Reply
These are some great questions on the community! Following another financial teacher, we fund the children's education last in the large scheme of things. I know it sounds hard, but mom and dad's retirement needs funded too and the money needs to be in there over a long period of time to grow. Help after high school has been, here's what we can do $x.xx after our budget is balanced (not dipping into retirement contributions, 2nd mortgages, parent plus loans, or anything like that). We try to project it over 4 years, but say it's not a guarantee because a job loss or something could happen. Then the adult child has some decisions to make on where they go to school, how well they do on SAT, how much they work while in school. I'll have to wait about 6 years to know how it all works out.
Also, remember some employers still pay for school, too!Reply
On the funny side a co-worker said her sons will not get to go to college, they are going to be welders. That's because we have a machine company nearby that advertises they will pay top welders from the local tech schools $60,000 a year first year and the pay tops out around $90,000/yr. She was like, nope you're going to the tech school and become the top welders. It is some specialty welding they do to repair machines in factories around the US.Reply