Comments on: Dave Ramsey’s College Savings Advice

By: Michigan Money

Michigan Money — Mon, 07 Jun 2010 18:25:01 +0000

One thing that everyone has missed on this blog is that Dave Ramsey’s advice about ESA and 529s are all at risk to the market … Dave’s book and at least one other poster states that you should invest in these types of vehicles and earn 12% ror … Tell me who has received 12% over the last 10 years? The market history reflects that you would have been lucky to receive a total return of 12% for the entire 10 years. 10K deposited in a 529 or ESA in 2000 would be worth less today no matter if you were indexed to S&P, Nasdaq or Dow. Dave’s advice for investing worked well from 1982 to 1998 but the wheels have come off over the last 10 years. I guess that is not long enough term for Dave

By: Peterman

Peterman — Sat, 16 Aug 2008 15:03:28 +0000

This provides a good comparison:

http://www.fool.com/college/compare.htm

By: Chancy

Chancy — Fri, 18 Apr 2008 14:47:08 +0000

Full disclosure: I teach Dave Ramsey’s FPU at my church, so I am a fan. You must recognize two things: 1. Dave assumes that responsible investors, such as the ones with the foresight to plan for their children’s college, will do their research and only invest in quality, long-standing mutual funds with a good track record. 2. He is not suggesting you continually roll your investments around, focusing on short term results. He’s making a point that YOU have control over where the funds are invested, as opposed to allowing someone else dictate that to you. and 3. If you’ve ever listened (or watched) to Dave Ramsey, you’ll know that he has answered this question hundreds of times, so it’s not a “spontaneous” answer. The ESA offers a more flexible definition of “qualified education expenses,” thereby increasing the chances of using all of the funds in the account, and minimizing the amount remaining, which would be subject to penalties and taxes.

By: Stephanie

Stephanie — Thu, 24 Jan 2008 23:06:11 +0000

I don’t understand how people could have a hard time picking the right investments. Look at the past returns for 10-20 yrs, and the expenses. I showed some mutual funds to my 9 yr old sister and even she knew which one to pick. (Duh it’s not the one with the 5% return)

By: Mike Simone

Mike Simone — Thu, 17 Jan 2008 20:46:53 +0000

First, I am a Dave Ramsey fan, but I must admit he seems to be very naive when it comes to investing.

Yeah, I know he has more money than me, but I often cringe when he gives investment advice.

Anyway, it was a great post Moolanomy. First time here.

By: Pinyo

Pinyo — Thu, 17 Jan 2008 13:20:16 +0000

@NCN – Welcome to Moolanomy, and thank you for stopping by.

“Dave not only encourages SAVING for college, but BUDGETING for college, once a student begins school. Plus, he encourages living in inexpensive housing (dorms) and having a job. His goal is to promote a balance between retirement / education / and long-term savings.”

I think this is a great advice. I am not saying that he gives bad advice in general. I think he’s great and what he’s doing is admirable. I like the idea of teaching children to be financially responsible and to share educational expenses burden with their parents — I think they should do all of the above as Dave suggested.

I just thought that this particular advice I heard was not that good.

@CFO – Hi, there! I am not trying to be harsh on Dave. I just disagreed with this particular advice.

Good point about using ESA for pre-college education expenses. That’s one nice thing about ESA — it’s more flexible in term of how you use the money.

@Best – Welcome to Moolanomy.

“Dave Ramsey gives different advice about college savings than me”

It could be, but I still think presenting ESA as better because (10 it more investment options, (2) you can change to a different investment if you don’t like the one you currently have, and (3) because there are some bad 529 plans out there, still represents a “bad advice.”

Regarding #3, there are a lot more bad investments to weed out than there are bad 529 plans.

By: Best

Best — Thu, 17 Jan 2008 12:33:33 +0000

@ Pinyo
I see where your coming from but from my point of view, Dave Ramsey has helped tons of parents put their kids through college debt free.

So his advice can’t be bad. It’s just different from what you recommend. Therefore, the title of your post should be “Dave Ramsey gives different advice about college savings than me”.

Just my 2 cents.

By: NCN

NCN — Thu, 17 Jan 2008 03:08:29 +0000

Over the course of the last 4 years, I’ve listened to Dave’s radio program hundreds of times. If you listen, you’ll find that Dave not only encourages SAVING for college, but BUDGETING for college, once a student begins school. Plus, he encourages living in inexpensive housing (dorms) and having a job. His goal is to promote a balance between retirement / education / and long-term savings.

As for the advice Dave gives, his primary goal is to get people to “think” about their financial decisions. I for one owe a LOT of my progress to his plans. That being said, I’ve moved beyond “15%” in retirement and ONLY using an ESA – but, for folks who are brand-new to personal finance, I think Dave rocks!

NCN

By: Pinyo

Pinyo — Thu, 17 Jan 2008 02:23:41 +0000

@Kevin – He probably is, but that doesn’t mean anything. Just because someone is a good practitioner, doesn’t mean he is a good teacher.

By: Chief Family Officer

Chief Family Officer — Thu, 17 Jan 2008 01:17:28 +0000

Hey Pinyo, I think you’re being unnecessarily harsh on Ramsey (not that I’m a fan, everything I know about him I heard from someone else). Although you make a good point about needing to know something about investing before putting money into an ESA, the same really holds true for 529s too. And I think there are times when an ESA is a better choice than 529s, as in our case, when we’ll be paying for private school. We can withdraw money from an ESA as soon as the kids start kindergarten, so I’ve fully funded ESAs for them instead of opening 529s (though I’m always thinking about that).