So, this is the first post.
I was listening to the radio today and heard an interesting discussion about college funds. The basic opinion was that saving for your children's education should not be done until you have fully funded your own retirement account. The rationalle being that there are many ways to pay for college (part time/summer jobs, scholarships, grants, student loans, etc.), and only one way to pay for retirement (you put money in a savings account).
In particular, it was advised to avoid special government college savings accounts (529 plans) especially when your kids are young. If you put tons of money in and don't end up needing it because your child is a good student and earned a full ride scholarship, you will have to pay penalties to use that money for something else.
I just checked out some info on savingforcollege.com and they say that if a beneficiary dies, or gets a scholarship that you can file for an exception and avoid the penalty, but that there are still tax issues involved, because non-qualified distributions will be counted as taxable income in the year they are used. So I suppose that if you took $50,000 not needed for school and used it as a downpayment on a house, that would increase your taxable income by $50,000, thrusting you into a higher tax bracket for that year instead of spreading it out over several years at a lower tax rate.
Anyway, I thought it was an interesting discussion, and would like to hear other thoughts on the subject. Addy is only 3, so my practical experience is very shallow compared to many of you.
~A
Perhaps I'm delusional, but I have never really seriously considered saving money for my child's education. Probably it has something to do with the fact that Kevin and I both put ourselves through college with jobs, scholarships, and loans (which have been paid off). I know that getting education is important, but I saw so many students just wasting their parents' money because they didn't really care about being there--even at BYU. I'm sure it is even worse at other schools where the college life offers so many worse attractions, as well as being more expensive. So it's always made sense to me to fund your own future first and raise your kids to take care of themselves (and then help them out if you are in a position to do so when the time comes).
ReplyDeleteI generally concur with Carol. I was very much raised to pay for things that I wanted to do. Not that I felt that my parents were too poor to pay for it, but because that is what a responsible person did. This included college. I talked with mom when I started getting social security when dad did. We were planning to set it aside to pay for tuition and I would pay for living expenses by working, or grants, or whatever. As it turned out, that money went for other pre-college expenses, and I am currently paying for college through grants, scholarships, and a part-time job. I feel like it works great and teaches me a great deal of responsibility. I like it.
ReplyDeleteThe point comes because Michelle, my fiance, came from a house where her parents paid for all there children's college tuition through the GET (Guaranteed Education Tuition) Program, because that is what their parents did. She would like to continue this. I have no major objections. It might even be considered an investment because of the inflation of tuition rates in recent years (you pay for a certain predetermined tuition expense, estimated on current tuition rates, and then GET guarantees to pay for your child's college when they get in). But I also would like to see how this will all pan out financially, because she got a full tuition scholarship for her undergrad, and so it is now being applied to her graduate school. I don't know how it will pan out when she gets married because currently her parents are paying for housing and food, just as they did for her undergrad. I don't know if, in the end, it is a waste or not. For me the jury is still out.
(GET is only available for Washington residents)
The point was not whether parents ought to assist in paying for their children's education or not, but if it should be the first priority in savings.
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If it didn't come across in my prior post, I meant that I don't consider putting a priority on it over saving for retirement or housing, etc, because I haven't considered funding it at all.
ReplyDeleteI guess I would probably put it higher on the things to save up for list than, say, buying a yacht. So, I don't plan on buying a yacht until I have enough money saved up to put my children through college.
Tongue in cheek asside, I think I would be more inclined in the future when I have money to put into college educations (after I am setting aside a satisfactory amount to fund my own future needs) to donate to the funds that paid for my education--BYU scholarships and the like, more than saving specifically for my children.
We encouraged you children to work hard enough in high school to get good grades and qualify for scholarships. It worked in many cases, for which we were grateful. Your industry in helping yourselves has been appreciated by your Dad and me. Thank you.
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