What is “Fair” When Saving for College
July 9, 2009 – 6:51 am
When it comes to saving for college for the kiddos, what do you think is fair? Assuming you have more than one child, their ages may vary greatly and therefore the money invested for each of them could vary. Returns from one year to the next will also vary, and every child will have different goals, skills, and dreams.
So what do you consider “fair” when it comes to providing equally for your children’s college costs? Here are a few choices:
- save the same total $ but not for the same amount of time. For example, you could invest $1,000 for each child, but one child might be 5 and the other one 3. Therefore the 3 year old’s college fund will have more time to grow.
- invest the same amount for the same duration, and let market fluctuations and investment gains fall where they may. If you choose to invest $1,000 for each child, then invest that amount when the kids are the same age (i.e age 5, or age 0 for example).
- give each the same total dollars starting with the first year of college. If one account has more money in it you would need to switch beneficiaries once the appropriate amount had been spent from the larger 529 plan.
- split based on schooling needs? What if one child wants to be a doctor and another wants to major in philosophy. There’s nothing wrong with studying philosophy, but clearly one child will need more assistance will educational funding than the other. Some people do this when it comes to leaving an estate as well. Some children are simply more responsible and prepared to handle an inheritance than others. Ironically the kids that are more responsible probably are the ones that don’t need the inheritance in the first place!
- perhaps you agree to fund a certain number of years of school, regardless of the school? This could create an incentive the frugal child to go to 4 years of community college for the same cost as one year at Stanford.
Thoughts?
Image Credit: Paul Keleher
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