🎓 How to rationally think about College Savings

This year marks a significant terrifying milestone:

A college will have an annual cost exceeding $100k. (Looking at you, Vanderbilt 2024-2025)

Yikes. It’s not cheap being a communications major who just wants to eat cereal and play hacky sack in the commons.

College prices are wild, and I’ve talked to many clients who are either planning to have kids or have children already and are starting on the long road of college savings.

Either way, I get this question:

How do I even do this? Do I even save for their college?

Here’s how I’d think about college saving it: Save what you can.

College is a “What IF?” cost, but there are major expenses that will 100% come up and should be considered first.

Here are all the other important goals you should give more thought to:

• Emergency Fund

• If you own a house, a repair fund

• Vacation savings

• Future childcare fund

• Medical fund

This is just a short list but I think you should first make sure these funds are full before addressing college savings. Because you won’t have a choice for many other expenses over the next 18 years.

Okay! Maybe I can put some money away! Where does it go? Do I pay the college now? Do I pay a little money to every college and hope they would be impressed by my gumption?

529 Plan
You can start with a 529 plan, which is a savings plan where the funds go in an investment account, and when you withdraw them during college, you get all the interest tax-free (similar to a Roth IRA). However, you see no tax advantage the year you put in the money. You can learn more here.

And hey, the government kind of knows your kids may not go to college, so they’ve now allowed up to $35k of your 529 to be transferred to a retirement account.

Find the deals for college now.
Last week on the podcast, Author David Hill explained that he hasn’t saved a dollar for his three kids' college. One hope he has is that they take advantage of the CUNY (City University of New York) program where folks under a specific income bracket get free tuition. You may not know where your child will attend school, but check out what’s offered locally.

But yes, student loans exist.
“We’re still paying off our student loans, and you’re talking about our kids' loans already!” is what I heard last week from the parents of a two-year-old. But they exist and for a reason.

What I hear often: We don’t know if Little Danny will head to college in 18 years. In fact, will there even be college? Will AI let us have college between forced meals of Life Sludge nutrition packs?

I think there is a lot of truth to this statement, and I can easily say, I don’t know either. It’s already difficult to save for things we know will happen, such as retirement, house expenses, vet bills, and WWE Summer Slam on August 3 in Cleveland. But if you can start planning and saving now, you can give yourself and your kids the opportunity to say yes to college if the chance comes up.

If you have any questions or need personalized advice on how to navigate college savings and other financial goals, don’t hesitate to reach out. I’m here to help you make informed decisions and create a plan that works for your family. Let’s work together to give you a stable financial life.