We are currently in the midst of completing the college search for one son and beginning the college search for our second son. We’ve needed a crash course to keep up with the application and search process these days but the savings work had started years earlier. While most of the work falls to the parents and the student, the whole process of saving for school is very much a multi-generational activity. I’d like to share some of our lessons learned.
Our assumption has been that both boys would one day go to college, but early on, our only college savings came through their grandparents. While we probably felt that it would be a long time until our babies would be off to school – our folks were a bit wiser and started with small gifts including savings bonds. This is not uncommon as 85% of grandparents say they will pay some towards their grandchildren’s education. Despite a late start, we established a plan that revolved around organizing, setting goals, and discipline.
Our college savings were sporadic and in several different places. We wanted a way to achieve control and manage everything from one place. This came from opening 529 college savings accounts through our state. Everything can be managed online (including changing the beneficiary) and we receive a state tax deduction (all but 16 states offer tax deductions). Grandparents and others are eligible to open a 529 for any child. It is important to check the rules in your state – most states only give tax breaks to plans offered by the state.
There are a variety of college savings calculators available that will allow you to set a potential school and assumptions (inflation) and then project out how much you need to save. This allowed my wife and I to discuss what we were willing to commit and expect from our son. We decided we would pay for a certain percentage of in-state college expenses. If either son wanted to go elsewhere, they would be aware of what would need to be covered through non-loan financial aid.
With our goals set, we then established monthly transfers into the 529 accounts. With help from our parents and following a plan, we are now set to send our oldest son off to college where he’ll be attending the College of William and Mary (an in-state public school) in the fall. His application and acceptance was the result of hard work in school and navigating the search process this year, but, really this all started when his grandparents gave him a US Savings Bond the day he was born.