Skip to comments.College in 2028: Can You Save Enough?
Posted on 06/05/2013 9:58:10 AM PDT by Kaslin
Dear Carrie, I have a 3-year old daughter who I hope will go to college one day. Given the increasing costs, what's the best way for me to save? I've opened a 529 plan, but is there anything else I can do? --A Reader
Dear Reader, The first thing you can do is to give yourself credit for starting to save so early. While saving for a child's college education is an enormous challenge, making it a priority when it's so far away can be the first big hurdle. So you're off to a good start.
As someone who believes in the power of tax-advantaged growth, I'd say having a 529 account is one of the best things you can do. Not only does your money grow tax-deferred, but withdrawals for qualified education expenses are also tax-free. Let's talk about ways to maximize these benefits before we get into other ways to save.
--For now, make sure you're investing aggressively enough
Most 529 plans offer a variety of investing options, from conservative (meaning bonds and other relatively safe investments) to aggressive (meaning the stock market). As a general guideline, the longer the time until college, the more aggressively you can invest, giving yourself more potential for growth. Of course, with that potential for growth comes more volatility, so you would have to be able to accept that risk and be willing to stay the course in spite of market ups and downs.
As college gets closer, it's appropriate to gradually shift your investments out of the stock market. Some 529 plans have an option that will do this automatically. But if not, it will be up to you to manage the investments over time.
Looking at numbers, let's say you save $5,000 a year toward college for the next 15 years. With an average 6 percent hypothetical annual return, you'd have about $125,000. If you could increase that savings to $10,000 a year, you'd have $250,000 -- enough to cover the projected cost of four years at an in-state public university in 15 years.
--Put your contributions on automatic
A 529 account is only as effective as the savings you put in it, so if you haven't already, set up automatic monthly contributions to the account. Choose the maximum amount you can comfortably handle and consider it one of your nondiscretionary expenses. If it comes out of your checking account automatically, you won't have to give it another thought. And should your income increase, think about increasing the monthly contribution.
--Direct gifts or unexpected money to the 529
When your daughter gets a monetary gift, put at least a part of it in her 529. In fact, you might suggest to family and friends that money towards college is the best gift of all.
Likewise, direct any other unexpected gifts, inheritances, even bonuses, toward college savings. One caveat is that you don't shortchange your retirement savings in the process.
--Consider an Education Savings Account (ESA)
An ESA is another tax-advantaged savings account that could work as a supplement to your 529. It's only available to couples making less than $220,000 a year ($110,000 for singles), but if you qualify, an ESA has the advantage of being available for qualified elementary and secondary school expenses, as well as for college. The contribution limit is $2,000 a year and you make all the investment decisions. You might consider it as a way to diversify your college savings.
--Get your daughter involved when she's old enough
Your daughter is only three now, but soon enough she'll be in a position to contribute to her own college savings account. As she gets older, get her into the savings habit. Once she's able to get a part-time job, have her put a percentage of her earnings toward her education. To help her learn, you could open a custodial account. The money in the account would become hers at 18 or 21 depending on your state, but in the meantime, you'd be managing it and could include your daughter in making financial decisions. That way you can have the added bonus of teaching your daughter how to handle her money.
Remember, too, that there are other ways to pay for college. Loans, grants, scholarships -- these are all possibilities. And who knows what your daughter's talents and interests will be? As you watch her grow and develop, you can help direct her on a path that will maximize her future opportunities.
Spend all your money
Go into debt
If you play your cards right, your kids will be given a free college education at the school of their choice.
Final note: if you save money or accumulate assets, you may find that college is out of reach for your children. Don’t make this mistake!
I would suggest studying colleges and the results of a degree vs techical trade schools. Just throwing money at it is a horrible waste. Study the issue with half the effort you want your kids to expend in college and the odds are they will have a much better life, and you can spend most of the saving early money on them for better results.
Parents, do your share and instead of a college savings plan stay out of debt yourselves, pay off your mortgage, have no loans, just in case your son/daughter needs a little help.
But whatever you do, realize that it's DUMB to go into debt for a college education.
Imagine the business you could start with that. Take enough out to take two years of business courses at a community college then use the rest for start up costs.
Then again, who would want to start a business in this 0bameconomy?
In 2028, most colleges with the exception of elite and privately funded schools will be online.
Courses will be pre-recorded and teachers will become advisors and mentors.
School prices, due to no longer needing a big campus, teachers and other things will drop significantly. It will also no longer be price of credit, but fixed cost per semester where you can take as many courses as you can.
Happening now. More accredited schools are going online. Western Governors university Online has a program like that.
Three thousand for 6 months. Take as many classes as you want. Classes are 12 weeks long but if you can pass ss the exams you move on.
The problem is, not many employers honour the worth of such an education. That will keep the pressure to seek conventional university education at a high state.
I have been thinking for years that college courses should be video tapes of those lecturers who are best in their field. Not necessarily just one but what need is there for dozens of them teaching the same course at dozens of universities? A few who are tops could compete to sell their courses.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.