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Are You Saving Too Much for College?

Are You Saving Too Much for College?

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For parents who are saving for their child college education, they are mainly concerned about not saving enough. However, I don’t know if that many people think about the flip side.  For example, is it possible for some parents to save too much?

I got some great discussion going in my last article, and Chief Family Officer commented that $250,000 may not be enough for a good private school:

“…I do think that $400,000+ is more realistic if your child wants to attend one of the most expensive schools (Cal Tech, for example, is at $40K per year already, if you include room and board)…”

In another related post about my initial calculation for my son’s college costs, TBH offered another perspective:

“…I decided that I don’t have to be prepared to pay for his entire education. My plan is to tell him I can pay for all of a public school education. If he wants to go to a private school for some reason, I will encourage him, but he’ll have to take out loans for part of it. I want to help him keep his loans to a minimum, but I think it’s actually a good thing to put some of the responsibility on him so that he values his education more, etc…”

My wife and I intend to help our son pays for his 4-year college education. However, we have been focusing on the dollar amount and the investment strategy. After reading TBH’s comment, I had an epiphany. I really liked the idea of saving just enough for a good 4-year public college education, and having our son share the responsibility if he wants more.

Here are 4 reasons why I want my son to pay for part of his college expenses:

  1. It is less burdensome on our lifestyle and effort to save for retirement. Also, we have to consider our aging parents and possibility of having another child. We cannot let his college savings take precedence. After all, he has student loans, scholarships, financial aid, and other options at his disposal. For example, he can choose to go to a less expensive school. We do not have the same kind of flexibility with elderly care and retirement expenses.
  2. It teaches him a life lesson about trade-offs. Specifically, he cannot have everything he wants, and if he really wants something he will have to work for it. After all, 4-year Ivy League education is not a NEED; it is a WANT.
  3. It teaches him the value of money. We can show him the difference between a more expensive and less expensive school. Which one should he choose — go to a more expensive school and graduate with debt, or go to a less expensive one and possibly graduate with a positive net worth?
  4. Having our son share the responsibility of paying for his education may make him appreciate the education more.

How about you? How much are you planning to save for your children’s education?

This article was featured in The Carnival Of Education #138 hosted by Global Citizenship in a Virtual World.

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plonkee
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plonkee

Ideally I would save enough to cover the EFC for 4 years and a bit more. Super ideally, they’d get a scholarship and we could split the money 50/50.

KMC
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KMC

My wife and I have the exact same strategy as your commenter.

We took a guess at what in-state tuition would be based on today’s rate and the current (8-10%) year-over-year increase and came up with a number. If our kids want to go to a school more expensive then that, they’re welcome to but I won’t be paying the difference – they will.

Steve
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This is one of the best ideas I’ve read in a long time. Guaranteeing your child a college education at a public university but telling them they are on their own for a private university education is exactly the right mix of responsibility by the parents and the child.

I have pretty strong opinions about this, because I’ve never planned to pay for my son’s education, other than whatever grandparents, etc. contribute. I paid for my own education and frankly I expect my son to pay for his own, too – but this is a good compromise.

Chief Family Officer
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I completely agree with you that college savings is not as big a priority as other areas – we are sacrificing college savings for retirement savings and in a couple of years, paying for private school (our local public school is terrible; I have plans to blog about this soon). We will definitely help our kids pay for college; but how much assistance they get depends on how much we can afford then, not just what they want. What I hope was implied in my previous comment is that simply that if you plan to save the full amount of… Read more »

KMC
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KMC

@Pinyo – We’re right in line with each other if you consider inflation. The College Board reports inflation-adjusted public college increases of about 4% for the last 20 years. I figure, if anything, states are going to reduce funding for higher ed.

This is one saving area one want to nail as close as possible. Here, it is possible to ‘save too much.’ With that in mind, we’re prepared to adjust a little bit either way if we’re not on track many years from now.

SavingDiva
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SavingDiva

I don’t have children yet. However, I would like to pay for my future child’s college tuition. My parents allowed me to graduate from undergrad with no loans or debts. I wish to do the same thing for my children. If I save too much (or they earn a scholarship), I would just give them the investment account to kick start their retirement fund….

Becca
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Becca

I grew up in a family that put a tremendous premium on education and so my parents saved pretty much all they could — more than the federal government expected of them, anyway. I think that was really important. If you don’t contribute what the feds think you should, then understand that your child either has a choice of delaying education until they are financially independent (usually legally defined as around age 25 — which cuts into *their* lifetime income significantly) or taking on high-interest private loans. To be honest, a lot of parents think that it is their money… Read more »

TBH
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TBH

I’m very glad my comment caused you to have ‘an epiphany’. Many of the commenters hit the nail on the head. My parents paid for my entire undergrad education, and I did not choose a practical major. I did finish in 3.5 years, so at least I didn’t do the 6-year plan like my younger sister. But I still farted around. Took painting etc because I had a crush on an art major, not because I had a shred of artistic ability or interest. My son is 3.5. We’ve been saving for college since he was about a year old,… Read more »

Jonathan
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Jonathan

I totally agree with your perspective on this one, it encourages ownership and the recognitiion of the value of money

Are You Saving Too Much for College?

by Pinyo time to read: 2 min
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