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Alternative Ways to Save For College

  February 18

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ways to save for collegeThis past weekend, I was talking to a few other moms about college funds. Since I’m a personal finance blogger and all that jazz, they wanted to know how the hubs and I are saving for college for the twinsies.

Although we’re pretty new at the whole parenting thing and investing in college accounts, I’m happy to share what we decided to do since we put a lot of thought into it.

As of right now, each twin has investments in a custodial account that they won’t be able to touch until they are 18.

We plan on telling them about it and letting them be actively involved in choosing the companies and funds they want to invest in. It will be our way of teaching them about investing and also letting them choose how much money they want to go in.

Right now, any money from family is going straight in the account but once they are old enough to make their own decisions, we plan on encouraging them to invest some, spend some on something they want, and also give some to a cause they believe in. We don’t have 529s right now, but that’s not to say we won’t in the future. Right now, having a 529 was not urgent, but once our income increases and we need more tax shelters, we will look into it further.

The thing is, there are many ways to become an educated citizen of the world. 529s are restricted to fund traditional educations like college, but we believe that things like traveling, starting businesses, and learning various art forms like dance or painting are also forms of education.

We’d like our children to be able to use their money to fund the type of education they’re interested in, whether they want to go to a 4-year university, culinary school in Europe, or something else.

Just like there are many ways to become educated, there are many ways to fund educations. Here are some examples of more unusual ways to pay for them:

  1. Invest in Real Estate

There are several people I know, Holly included, who plan on using their real estate investments to help pay for their children’s education. One family I know purchased three houses and paid them off as their children grew up. Then, as each of their three children went off to college, they sold them one by one. This gave them $100,000-$200,000 for their children’s education each. Holly, similarly, plans on paying off her investment properties and letting the rent help pay for her two daughters’ college tuition. Hubs and I love these ideas and depending on how things go and where we live, we would be interested in doing something similar with real estate.

  1. Investing in Both Traditional & Alternative Funds

Many people invest in 529s for their children’s college education and that’s a great route. They are designed to be safe and steady and make sense for many people. However, if you’re an experienced investor, there are so many new types of funds to consider. Now, with the advent on online investing platforms, there are ways to invest starting with very little and very low fees. No longer are these types of  investments just for the ultra rich thanks to the Internet age.

  1. Have Your Children Work for It

A study recently came out that the more parents pay for their children’s education, the lower their grades are. Now, don’t get too upset, because there were also parts of the study that said many of these parents simply wrote the checks and were not actively involved in sharing their expectations.

Still, something remains to be said for having your children work through college and contribute some part to their educations. I worked many different jobs throughout college, and even though my mom told me I didn’t have to, I really persisted because I wanted to gain experience. I liked making my own money (still do!) and paying for my own little extras and trips gave me a great sense of ownership.

I want more than anything for my children to be extremely hard working and independent and I firmly believe they should take ownership in at least part of their educations. Parents really shouldn’t have to feel responsible for all of it. At least, that’s my two cents. We’ll keep you updated on the process as the beans grow up and learn more about money management.

How are you saving for your children’s college education? Would you ever consider an alternative investment for it?

This past weekend, I was talking to a few other moms about college funds. Since I’m a personal finance blogger and all that jazz, they wanted to know how the hubs and I are saving for college for the twinsies. https://www.catherinealford.com/2015/02/18/alternative-ways-to-save-for-college/

 

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15 responses to “Alternative Ways to Save For College

  1. On the first day of class, one of my journalism professors wrote a formula on the board which led to a conversation about how much we’re paying per class. His point: if you ditch my class you’re not only missing valuable learning, but throwing away hundreds of dollars. That always stuck with me. I also agree kids should work in college (whether or not their parents pay) and I think everyone should have a financial stake in their college educations. Lots of folks disagree with me on that one! Thanks for sharing your strategies!

  2. Even though I hate my student loans, they have taught me how to hustle. I could be resting on my laurels if my parents paid for everything. I like that you plan to teach your children about investing and help them make informed decisions with their money. And that picture! Swoon.

  3. Great point! I don’t have kids, but I’ve always been curious what I would do education-wise. My parents didn’t have a fund for us and it would have been such a blessing! On the other hand, my cousins had fully funded college funds but never went to university or college, and that money was only able to be applied to a traditional school.

  4. We don’t have a 529 for her, but we do have a separate account that holds all of her money she receives in gifts. We will probably start saving for it more after we pay off our house next year.
    I had help from my parents to attend college, but I chose an affordable state school that gave me a huge scholarship, and then I worked the entire way through college. I hope for the same for my daughter.

  5. We opted to go with a 529 because Maryland has one of the best investment plans in the country with low fees and we get the state tax deduction. I haven’t really thought past that, but a custodial account sounds like a great idea as well.

  6. I have a seven year old daughter and honesty, we just started saving for her college education. We already told her about that one, thankfully every time somebody gave her money like last Christmas, she gave it to and asked me to put it in her college savings.

  7. My kid is just five and I am still happy that I have more time to save for her education. What I do is I save money from my salary. But, I believe it’s not enough so I am now thinking to invest in real estate. Or maybe try to help my kid to be more smart so that she could get scholarship, which I had back in college. Lucky for me.

  8. We have a 529 for my oldest, funded by a generous gift from a friend, but that’s it. We aren’t saving too well for retirement yet, so we need to prioritize that first. That said, my parents paid very little for my very expensive college because I had scholarships and was an RA. So, I guess I’m not too worried.

  9. Great ideas. There is always the military service to join that can help pay for college. It helps the country and there are many jobs that can be considered somewhat ‘safe’ from hostile fire.

    Just do index funds in a 529. Picking individual stock will never equal the long term success of a S&P commission free trade ETF.

  10. We’re saving in a 529 plan since there’s a tax deduction. However, we’re more focused on saving for retirement and money from your IRA can be used for college also, so there’s flexibility there. I think there are financial aid implications if you save money in your child’s name. Both my wife and I went to state university which is still relatively affordable so we’re not too worried. I also agree that sometimes it’s good to let the child hustle and work a little. But of course, as parents, you also want to help them out too.

  11. I really like that you’ll be involving your kids in their college savings. I think that will allow them to appreciate it more, and will also encourage them to take school seriously since they were involved in getting there 🙂 And there’s absolutely nothing wrong with expecting your kids to help out, either by working part time or by earning and maintaining scholarships. Looking back, I’m grateful I had to do a bit of the work myself to get through college. It would have been super fun to have my parents foot 100% of the bill, but I wouldn’t have learned nearly as much (about how to take care of myself!), to the detriment of my adult life.

  12. I don’t have children yet, but I once had a friend who had a savings account for her children, and in lieu of gifts from friends and family at Christmas, birthdays, etc, always asked for contributions to the fund. My parents completely scoffed at the idea of “begging other people to help raise your children” but the more I think about it, the more I like it. I’ve seen so many mountains of toys and clothes given to children that go unused. Outgrown with tags still on. When I have children I want to keep the minimalist lifestyle and so asking for donations to the fund instead of gifts, I think is super smart.

  13. My parents helped me pay for most of my college degree too, but I was responsible for paying my own living expenses (for the most part). There were a few times I had to ask them for help to pay my rent on time (mostly around the time of my divorce when things were pretty scary financially). They were always there for me, but I also worked my way through school too. 🙂

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