I think saving for college used to be an easier equation for most parents, just know how much school costs per year, and save up for four year’s worth. Now, it seems more complicated for several reasons:
- College costs have grown much faster than inflation and cost of living increases in parents’ salaries
- There’s a general backlash against students being riddled with college debt long after graduation
- Trade schools or alternate specialized schools that take less than four years are increasingly attractive
- Politicians at the state and federal levels occasionally push for a free public college education
- Some countries provide free college education to foreigners already and with how easy it is to keep in touch now, this feels like a more realistic option than ever
With all this in mind, we decided not to tie up all of our college savings in the traditional 529 college savings accounts. There are still great tax advantages to 529s so we didn’t entirely give up on them either. I used one of those online college estimators, which all estimated between $100k and $150k per child, and decided on the following plan:
- While paying for full-time day care and preschool, we didn’t explicitly save for any college expenses (kids are expensive!).
- Once they entered public elementary school, we took 1/3 of the previous monthly payments and put them into a 529 account (we decided on using Wealthfront instead of a state-specific plan). We’ll continue the 529 contributions until we’ve contributed $20k/each (regardless of how much interest it’s earned along the way).
- The other 2/3s goes into our overall savings and investment planning. I experimented with individual college savings accounts but it got too messy with money moving around that I decided to stop that and simplify our overall strategy.
With this plan, the 529 accounts should end up reaching $30k-$35k by the time they graduate high school. No matter what happens with college education costs or what our daughters decide to do with their lives, this seems like a good bare minimum amount to spend on education. For the rest, we’ll use money we’ve saved elsewhere, pay with current income, or perhaps even borrow for them at low rates.