College Savings – the talk you need to have

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Disclosure: Vanguard invited me to this event and provided me with educational materials, meals, and a gift card to offset travel and child-care expenses. The views and opinions in this post are my own.

When Michael Corr began to speak about college savings during the Vanguard Family and Finance event, I knew I had to pay attention. While we are debt free, we’ve been more focused on getting our family into a home rather than saving more for the kids’ college funds. Truthfully, we didn’t (until recently) have an official college fun set up for them. It’s been a bone of contention of mine. The real reason we don’t have them set up? We’ve never sat down to talk about it.

Since Vanguard manages up to 50 million dollars in educational assets, I anticipated all of the information to be very detailed and helpful. I also hoped that I could take whatever I learned that day, and create a productive conversation with my husband. Here are a few things that we discussed that evening, and some great information I learned during the event:

1. Be upfront with your intentions

In my mind, I saw us saving for our children’s education, but with the stipulation that they could use the money for tuition, room and board only. They would have to be employed during school to take care of their books, travel costs, and spending money. The key word here is “employed.” I want them to have something on their résumé before they even graduate. Get ready for a shocker: my husband doesn’t want them to pay or do a thing while they are in college, except study. This is why we needed to have a straight forward talk. We are on two totally different pages.

2. Look into 529 plans in all states

You can invest in any college savings plan in any state. Since my husband is from Ohio and I’m from New Jersey, my goal is to create two 529 plans in each state. Once my son is old enough to decide where he wants to go, we can withdraw from one of the college savings plans, and add that money to the other 529 plan. Some states require that you invest in their own college savings plan in order to be eligible for a state tax deduction, while other states don’t have that requirement in order to get the deduction. Be sure to do your research for your own state to see what their rules are in terms of deductions.

3. Pre-paid tuition plans are also an option

With a pre-paid tuition plan, you pay for your child’s future college credits at today’s rates. I love this idea because we can have our kids’ schooling paid for within our state right off the bat, and I won’t have to worry if we’ve saved enough once they are juniors looking at colleges. My husband was leery of this option since we would have to pay any difference if our kids decide to go to a private in-state school. So, if our son got into Princeton and decided to pass on Rutgers, we’d still have to pay for his schooling. Also, we don’t know what the price of private schooling will be in 10 years, and just thinking about that extra expense produces stress in both of us. Another great part of pre-paid tuition: even though you will be investing in your state’s version of the plan, your savings can still be used at any college, even out-of-state.

3. Look for online help for college savings

We do everything else online, so why not look for help on how to save? Sites like GradSave are a great help;  you can set up a simple college savings plan and have friends and family add to it easily. Look online for resources to help you stay on track for college savings. Speaking of help…

4. Get the grandparents involved

One of the best tips I heard during the event was to encourage grandparents and other family members to contribute. Instead of spending incessant amounts of money on noisy toys for the holidays and kids’ birthdays, share links to the 529 plans or whatever online plan you decide to use. Here’s a great compromise: let them buy one noisy toy per kid, and put the rest of the money in the college savings plan.

5. Keep the investments cheap

Price matters when it comes to investing, even with college tuition. Usually the minimum amount needed to invest in college savings is $25. Look for programs that are more budget friendly. The cheaper the program is, the less fees you have to pay, which means more money for you to put into the investment. Every dollar you save, is one less dollar you (or your children) will have to borrow.

6. Start now!

I was so ashamed that my son’s 8th birthday passed without us having a set college savings plan for him. We have money put aside, but it was never put into an actual, tax free college plan. Now that we have our game plan, and we know how much we want to save for both kids, we’re on the right track. The hardest part was realizing that it’s not too late.