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Conference moira::parenting_v3

Title:Parenting
Notice:READ 1.27 BEFORE WRITING
Moderator:CSC32::DUBOIS
Created:Wed May 30 1990
Last Modified:Tue May 27 1997
Last Successful Update:Fri Jun 06 1997
Number of topics:1364
Total number of notes:23848

251.0. "saving for college education" by ULTRA::ARGO () Mon Aug 13 1990 17:22

I've looked and could not find a note discussing saving for a daughter/son's
college education.

I have some friends that have a daughter entering college in September.
They do not have enough money saved up to pay all of the tuition (nothing
surprising here), so they investigate low-interest school loans.  To there
dismay they discovered that because they had put money away in their daughter's
name they did not qualify for the low interest loan (or they were allowed
a much smaller amount than they needed).  However, if the money had not been
in their daughters name, they would have qualified for the loan.
This is a result of the way in which one's ability to pay in computed by
the school.

I've a 3-year old daughter and a 1-month old son, both of which I want
to help with their college education (if they want to go to college, that is)
as much as reasonably possible.  The experience of my friends scares me
a little.  So, I would like to hear other experiences and, ideally, to get
a pointer to someone that I can go and talk to in a effort to minimize the
chances of unwanted surprises.

Dennis
T.RTitleUserPersonal
Name
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251.1Try financial planners.STAR::MACKAYC'est la vie!Mon Aug 13 1990 18:098
    
    There are a lot ways to save, some tax free...Talk to a financial 
    planner, like folks in Merryll Lynch, Fidelity Investments, etc.
    They can give you some good ideas.
    
    
    Eva. 
    
251.2CLOSUS::HOEDaddy, what is war?Mon Aug 13 1990 19:0710
We started a savings account for Sammy with all the monies we got
at his baptism, birthday monies and gift monies. Along with that,
I am taking a $5/week deduction into the same account so that he
can use it when he decides on education beyond his high school
basic education.

His grand parents on both sides has gift-to-minors accounts set up
for his education also.

calvin
251.3Pointers.IOSG::CORMANTue Aug 14 1990 08:5215
See these notes in the SUBWAY::INVESTING notes file. 
    
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                             Investing and Computing
Created: 17-MAR-1986 10:02         1920 topics        Updated: 13-AUG-1990 21:53
 Topic  Author               Date         Repl  Title
--------------------------------------------------------------------------------
   351   OMEGA::BROWN        29-DEC-1986    11  Munis For College Fund
   823  CIMNET::NMILLER      10-DEC-1987     8  Need college financial aid info
  1129   CSC32::J_WARDLE      2-SEP-1988     0  College for Financial Planning
  1143   POBOX::ROSENKRANZ   22-SEP-1988    20  Planning for College
  1151   GUCCI::CONDON        3-OCT-1988     2  College trust funds & bonds?
  1219  WINERY::BOUCHARKE    12-DEC-1988    23  saving for college
  1227    STAR::HARRIS       19-DEC-1988     0  Info on College Funding System?
  1602   VMSSG::NICHOLS      27-NOV-1989    11  ?Series EE bonds as a college vehicle?
251.4Vote - financial plannerMAJORS::MANDALINCIWed Aug 15 1990 08:3825
    Personally, I would second the vote for a financial planner or a
    financial analyst. A planner is better because they will help you do the
    investing rather than an analyst who will tell you things like "you
    can afford to put away X dollars every week" but never tell you where
    to invest the money to get the results you want.
    
    I have the luxury of having an uncle who is a financial planner and he
    has recommended a certain "program" for us that will fit our needs for
    the college education of our children (too late for the 2 we will be
    covering over the next 7 years but in plenty for the younger children).
    
    Do check around. We originally went to American Express Financial
    Services based in Boston. We paid $300 for "life-time membership" for
    them to do our financial protfolio. They ended up telling us, since
    you have no money saved (spare cash around), you have nothing to invest
    so you'll never have money earning for you. It seemed a little stupid
    becasue we knew we didn't have wads of liquid cash, but wanted to be
    told to "invest" X $'s into something that would prepare our future. We
    plan on going back to them once we return to the States and get our
    "life-time membership" out of them.
    
    It is estimated to be approximately $40,000 a year for a college education
    by the time my son starts. We better think in advance.
    
    Andrea 
251.5BondsNETDOC::VASSILWed Aug 15 1990 14:3813
    Hi,
    
    My husband and I started to worry about the ole' college fund.
    Our son is 4 1/2 and one on the way.  About 1 year ago we started
    to have $5.00 deducted from my check for bonds.  Never miss the $5.00
    and now the bonds are starting to add up. Maybe by the time Pete is ready
    for college we may just have enough (for one of them anyway!).  
    
    We were thinking when they matured, cash them and put in a money
    market.  We don't know too much about bonds or how they work.
    
    Linda
    
251.6watch your money bucketsULTRA::ARGOWed Aug 15 1990 15:057
    re .3: 

    Good pointers!  After looking through this notes file a little, it
    is clear that not only should you start saving as early as possible,
    but you must be very careful into what buckets you save.

    Dennis
251.7Who wants to be a millionaire... I do!ODDONE::SANWELLThu Aug 16 1990 10:1818
    We are expecting our first in January 91.  Recently we have been
    thinking about savings account for 'junior'.  Obviously education
    is top of our list, but it is frightening to think about all the
    other things we would like to save up for him/her.  ie.  If female,
    how about a fund towards her wedding (very expensive).  We would
    also like to have the funds to buy his/her first car on 17th birthday.
    Also with the way house prices are we would like to put a bit away
    each month towards a deposit for a house.  I know these are long
    term investments, but with the amount of money we would have to
    save to do at least  1 or 2 of these things I think we should have
    started 10 years ago.
    
    Of course the above is over and above the every day 'running' expenses.
    
    Anyone qot a million they would like to leave me in their will.
    
    Barbara Hough
    
251.8some issues to think aboutTLE::RANDALLliving on another planetThu Aug 16 1990 13:0560
    Some thoughts on financing children generally and college
    education in particular:
    
    The first thing you do before you start saving for the kids, 
    whether it's for a birthday car or the tuition for Harvard, is
    come to some kind of an agreement with your spouse about  what is
    essential for raising the child, what would be nice, and what you
    wouldn't buy even if you were as rich as Jackie Onassis.  I speak
    from experience when I say that if you're putting aside money that
    could be used for other family needs in order to meet a goal that
    one partner considers unnecessary, there's going to be a lot of
    stress in the marriage around that issue . . . 
    
    Different people from different backgrounds have different values
    on these things.  In my tradition, a bride gets the wedding her
    parents can  afford, or she pays for it herself, or (most likely)
    she and the groom both pay for it, with both families pitching in. 
    I'm not saying this is right, or that anybody else's marriage
    tradition is wrong, only that for me, saving for my daughter's
    eventual wedding (in this day and age, she might be 30 or more by
    then, if she ever marries) is not just unimportant, it's
    irrelevant.  
    
    Similarly, you have to decide whether your college goal is for "a
    college education at whatever school is cheapest,"  "a good
    school," or "any school she wants to, even if it's Harvard."  Many
    people feel that if their child wants to go to an expensive
    school, they should contribute the difference between an average
    education and the expensive one.  Again, I'm not saying that any
    of these goals is right or wrong, only that it's important that
    you and your spouse discuss these issues, understand each other's
    views, and agree on some kind of plan of action.  
    
    And then you have to prioritize these goals with the goals of
    other members of the family.  Is a private education worth more to
    this particular family than the daughter's wedding, the  father's
    desire to see the world on vacations, the mother's desire to start
    her own business, her wish to get a graduate degree or his to own
    a second home or a boat or moving to the country where the kids
    can grow up with fresh air and chickens?  
    
    For instance, a friend of mine left a plush investment banker's
    post to become a loan officer at a very small bank in Colorado. 
    His kids were 11 and 9 when he moved.  They made a number of
    sacrifices so they can live in their mountain home, but they all
    agree it was worth it, even if the daughter is probably going to
    Colorado State instead of to Smith, which she has the grades for. 
    She says she's going to get an excellent at CSU, and it's what she
    does with the education over the next 70 years, not where the
    paper came from, that will matter.  
    
    I have another friend who has taken on a second full-time job. 
    She's an executive assistant in the day and a retail sales manager
    at night so her daughter can go to Yale.  
    
    Who's right?  Both of them. Because  there aren't any right
    answers, only what's right for your family.  But it's a more
    complicated issue than it appears on the surface.
    
    --bonnie
251.9my *opinion*TIPTOE::STOLICNYThu Aug 16 1990 13:306
    re .7   I know it's all personal preference, but I'd definitely
    get the house NOW and worry about cars, weddings at a later date.
    You could always take out a home equity loan in 18 years for those
    things....
    
    fwiw, cj/
251.10I don't want to mortgage my home for 25 + 25 years!HPSCAD::DJENSENMon Aug 20 1990 10:0954
    
    I'd like to think that we "can" worry about JA's college education
    "next year" ... but the fact of the matter is, you CAN'T!  Just sit
    down and calculate what 4 years of tuition and expenses at the local
    STATE university is and then ask yourself "even if my house is paid
    OFF, "CAN" I draw enough ... and would I WANT TO DRAW THAT ? !!  ... 
    extending out a mortgage another 20 years or so (no doubt into your
    retirement, etc.) !!!"
    
    Bottom line:  You've got to save ... somehow ... some amount ...
    anything! ... stash it away!  Even pocket change is "something" which
    amazingly adds up!
    
    I've known people who save all those iddy-bitty manufacturer rebates
    into a child's savings account.  My sister/brother-in-law make their
    kids save 1/2 of all their income (paper route, birthday money, etc.).
    My folks did small Christmas Clubs and then rolled it over each
    December into our savings, along with Savings Bond stamps (via the
    school system ... each week you buy a stamp or two and when your book
    is full, you go to the bank and get a bond ...).  Granted, we didn't
    have enough for our college expenses, HOWEVER, it sure did help!!!
    Then my folks made a deal ... they'll pay the first 1/2 of our college
    expenses and we pay the second half (then we have time to adjust to the
    responsibility AND "save" ... and use the funds they helped us save). 
    We survived!
    
    Jim/I "save" ALL of JA's gift money ... and make a weekly contribution.
    It's DEFINITELY NOT EASY!!  There's many a week when the alligators
    seem to be closing in on us and we can't seem to drain any water from
    the swamp!, BUT ... try to stay focused on the long-term consequences
    and then saving "even that little amount" seems VERY important. (Our
    accountant recommended a "...Child's Act" savings account, which is
    tax-free until the money's withdrawn ... available through the DCU.)
    
    I saw a TV show recently which addressed college expenses and (I hope
    you're sitting down for this one!) ... if you save "minimally" $25/week
    "at birth", your child will make it through an "average" undergrad
    program ... BUT, if you wait until the child's "7" to begin saving, you
    need to double that $25!! ... and the scale continues UPWARDS!  
    
    Now, Jim would like to believe that "the government" HAS TO become more
    involved in this problem, but I'm sure not depending on THE GOVERNMENT
    to educate my child!!  And the current status of student loan paybacks
    (from graduates) is STAGGERING (at best) ...  that program's gone
    bust and will be "history" long before JA starts college!  When you see
    the GOVERNMENT's involvement in elementary schooling, how can you
    possibly expect any assistance with "higher education"?!!  I'm
    definitely not banking on any "assistance" being available to JA in the
    year 2007!
    
    So, it all boils down to "OUR" responsibility!
    
    Dottie
    
251.11clarificationTIPTOE::STOLICNYMon Aug 20 1990 12:1913
    re: .10
    
    Dottie,
    
    I'm not *really* advocating drawing against one's home for a 
    college education.   Ignoring the Massachusetts market :-), home
    ownership is usually a fairly decent long-term (and I guess 18
    years qualifies as long term) investment that tracks inflation
    fairly well.   (I don't want to get into a "discussion" about real 
    estate in this note).    I guess I see mortgage payments as more
    "useful" than rent payments, that's all!
    
    Carol
251.12you need to pay attention to the tax laws tooTLE::RANDALLliving on another planetMon Aug 20 1990 12:3713
    According to a friend who sent her son off to his first year of
    college last year, under last year's tax laws it was more
    advantageous to take a home equity loan for college expenses *even
    though she had the money on hand* because of the deduction she got
    for the interest she paid on the loan. 
    
    Again, that was last year's tax laws.  She says the advantage
    isn't as great this year, and who knows whether it will be true 
    in the future.  One of the hardest parts of the planning is not
    knowing what the tax laws will be or what kinds of programs and
    problems are available.  You kind of have to guess.
    
    --bonnie
251.13STAR::MACKAYC'est la vie!Mon Aug 20 1990 12:469
    
    A brighter side, once the children do not require daycare
    (read big bucks), some of that money can go into college fund,
    say 50%. We just have to be disciplined enough not to spend that
    money somewhere else.
    
    
    
    Eva.
251.14$nnn,nnn paid for TWICE? !!HPSCAD::DJENSENWed Aug 22 1990 17:0026
    
    Carol:  
    
    True, mortgage payments is DEFINITELY more beneficial than rent
    payments!, however, paying my mortage is PAINFUL and I wouldn't want to
    have to do it TWICE (refinance for college tuition) -- especially
    during a time when I'm planning on retiring (on a fixed income).
    
    ---------------------------------------------------------------------
    
    I know we're getting offtrack (real estate vs. college expenses),
    HOWEVER, incurring a large expense (mortage) to get a tax writeoff
    (of a percentage of the "mortage cost") doesn't seem like a BIG benefit
    to me, either ... whether it's to pay for college expenses, home
    improvements OR WHATEVER!
    
    I guess you can tell from "my tone" that I am HELL-BENT on paying for
    it BUT ONCE!  I don't see our mortage payment as "nnn/month, but
    rather as $nnn,nnn spread over 20-30 years!!  When you see your
    mortgage in 6-digit numbers, it sure is an eye-opener!
    
    Back to college ... I'll keeping feeding JA's piggybank, cashing
    manufacturers refunds and making a weekly donation (the best I can)
    and HOPE FOR THE BEST! 
    
    Dottie
251.15CSC32::J_OPPELTJust make more friends than foes.Thu Aug 30 1990 22:5333
    	With expected college costs running at around $40K when my kids go,
    	there is no way I can afford it.  We have 4 kids, so popping $25
    	per week per kid is simply impossible.  If I could afford to sock
    	away $200/week, I wouldn't have to worry about affording college!

    	When I went to college, (there were 5 kids in my family), my 
    	parents offered to pay all room/board costs.  We each had to come
    	up with the rest.  We took out student loans, worked summer jobs,
    	got financial aid, and took on-campus jobs.  We all made it.

    	My kids will do the same.  

    	Actually, I envision a "corporate ROTC" for college students.  As
    	college education becomes more and more unaffordable, fewer
    	students will opt for college, and the pool of educated workers
    	will drop.  Corporate America will be forced to put their "rookies"
    	through college to ensure quality students continue to graduate
    	to staff their positions.

    	Still, I have a small account for each of my kids.  I put $2/week
    	into each.  They will not know about it until they go to college.
    	The meager sum that they will get from it should help buy books
    	and what-nots, and it will be a nice send-off for their freshman
    	years.
    		
    	And I agree with some previous replies:  It is only under limited
    	circumstances that the college you get your degree from really
    	makes a difference.  In fact, it often doesn't matter what your
    	degree is in!  It just matters that you have a degree so that you
    	can show that you are educable.  Much of your college education
    	is not really applicable to the real world...

    	Joe Oppelt
251.16Terror tuition not realistic (I hope)MINAR::BISHOPFri Sep 07 1990 18:0147
    Some basic points:

    1.	As .12 says, laws and programs are going to change; what
    	makes sense now may be the wrong thing.  The fact that
    	this makes life hard (or that the current rules might be
    	offensive to your values, as they are to mine) is just
    	something you'll have to live with (or run for office...).

    2.	Currently, most institutions follow a set of rules which
    	calculates the "contribution" of a student and the student's
    	parents.  The scary figures given (e.g. $15,000 for a year's
    	tuition) are the _maximum_, not the default.  As an example,
    	the rules assume:

    	A student will use up almost all of his or her savings, and
    	most of his or her income (and will make something like $2000
    	over the summer--I forget the exact number).
    	
    	Parents will use about half of their savings for all their
    	children--the exact percentage depends on the number of children,
    	the ages of the parents, and the amount of savings.  Parents
    	will also use something like 5% of current income--the amount
    	depends on various factors, again.

    	Once the contributions have been calculated, institutions figure
    	out a package of grants, loans and so on to fill out the rest of
    	the nominal cost.

    3.	The "terror tuition" predictions are most likely to be false.
    	They usually assume that tuition cost can grow faster than
    	inflation for decades, which is unlikely.  Given the baby bust,
    	there is going to be a lower demand for college educations, 
    	and thus tutition costs might well begin to grow more slowly
    	than inflation.  Compare the tuition-cost arguments to those
    	given for housing prices--they both grew rapidly for a while
    	but can stop (and go backwards) anytime!

    5.	Saving money is good anyway.

    Now, I've just set up a trust for my son, but that's due to some
    special circumstances--for most parents I'd recommend just saving
    in the parent's names and going into equities (see INVESTING for
    details).  It's important to do the clarification of goals which
    Bonnie recommends, and to be educated in the area before you make
    any irrevocable moves.

    			-John Bishop
251.17RDVAX::COLLIERBruce CollierThu Sep 13 1990 20:1235
    I'm afraid I feel that .16 is rather too comforting on several grounds.
    
    It is correct that there are fairly standard ways for calculating
    "parental contribution" from family income and savings.  But the
    aid offered won't necessarily be painless.  It starts with summer and
    term-time earnings, but likely moves on to market rate loans (to both
    parents and student), and not to significant grants for most families.
    
    In addition, there are VERY few colleges left which do need-blind
    admissions.  Most have little scholarship money of their own, though
    they will help you try to get loans.  They may well agree with you that
    the aid package they offer is inadequate for you to meet their costs,
    but that doesn't make it get bigger.
    
    Finally, it is a safe bet that college costs will continue rising
    faster than inflation, as they essentially always have.  The
    preponderance of college expenditures are for salaries, and all
    salaries tend to exceed inflation over the long haul (let us very much
    hope this doesn't change).  It seems likely that government funding of
    higher education (both federal and state) will continue to shrink,
    which will make tuition go up more.  College enrollments have already
    been shrinking for a decade, and this only tends to force tuition up
    more.  Unlike the housing stock, the supply of college "slots" can
    shrink in the face of declining demand, through faculty retirements and
    layoffs.  Yet costs do not shrink in proportion to declining
    enrollment, as some costs are fixed, and some economies of scale are
    lost.  Either tuition must go up more, or the product must be diluted.
    
    On the other hand, parents with kids in full time pre-school may
    already be paying at something like half the college tuition rate!  If
    they can manage to save comparable amounts when their kids reach public
    school age, they can both afford college and retire wealthy!  I wish I
    could figure out why that wonderful advice is so impossible to follow.
    
    		- Bruce
251.18Woodmen of the World's program ?FORTSC::GUPTAAbha GuptaWed May 01 1991 21:3611
I am interested in knowing about the Woodmen of the World's fraternal 
benefits program for the College tuition assistance. If some one 
out there has used, heard or know about this program, I would like to 
hear your opinion. One of their agents is selling this program in 
our area to the High School students. 

Thanks in advance

Abha Gupta