Saving for child's education

[E_7]

We wish our son attends a private school we have been looking into for quite some time. We, especially myself, have our eyes set on that school in particular. It a bit expensive in the eye, but affordable to us especially if I get a job. Doesn’t matter the pay as long as I earn a minimum of 28,000 per year which is the highest cost (high school grades tuition costs more than elementary and middle school) of one academic year of high school level. And 44% of students receive financial assistance.

My son is almost 7 months old and I really want to start saving for his education as soon as possible so that I can rest assured that we will afford all grades until he goes to college. We can try saving small amounts now until I get a job (if ever…).

My question is, what is the best thing to do for saving money to pay for my son’s elementary-high school years? Just a savings account? a 529 -]college /-]savings plan?

 

[pensmama87]

Other people can chime in on the specific savings method you choose, but I do want to recommend that education saving should probably come after other expenses and savings - debt, emergency fund, and retirement. If you have no debt besides a mortgage, 3-6 months worth of household expenses saved, and you’re already contributing 15%ish of your income for retirement, then I would say you’re in a good position to put extra toward tuition at any level.

I also want to point out that tuition rates change and that even at the most prestigious schools there are scholarships available (both merit and need-based.) I don’t say this so you feel comfortable “slacking” on a goal, but just to note that the sticker price is not always reflective of what families are actually paying (and there are always the unseen expenses too, which I’m already finding just at the preschool level - class party funds, school supplies, not to mention the fundraisers, which are actually not so bad at our Catholic parish school in comparison to some of the stories I’ve heard. )

(Of course, here is also the obligatory note that you might change your mind about the school or you might need to make another decision for other reasons, and that in no way means your child will fail at life. $28,000/year is steep, even at the college/university level. Though it would be nice, if you did end up making alternative arrangements, and you had that money saved - it could go to quite a lot!)

 

[Xantippe]

We wish our son attends a private school we have been looking into for quite some time. We, especially myself, have our eyes set on that school in particular. It a bit expensive in the eye, but affordable to us especially if I get a job. Doesn’t matter the pay as long as I earn a minimum of 28,000 per year which is the highest cost (high school grades tuition costs more than elementary and middle school) of one academic year of high school level. And 44% of students receive financial assistance.

My son is almost 7 months old and I really want to start saving for his education as soon as possible so that I can rest assured that we will afford all grades until he goes to college. We can try saving small amounts now until I get a job (if ever…).

My question is, what is the best thing to do for saving money to pay for my son’s elementary-high school years? Just a savings account? a 529 -]college /-]savings plan?

Some thoughts:

1. Bear in mind that you may have more children sooner than you expect, so you may find that you can’t go on with private school and have to withdraw. We do two modest private school tuitions for our older children and have a good-sized mortgage (not crazy, but not small), and we are tapped out. By the time that our third child is of school age, we will be facing a total monthly tuition bill that will be larger than our mortgage plus property taxes.
2. Are your other financial affairs in order? Do you have debt? Have you started retirement? Dave Ramsey’s Baby Steps is very helpful as a life plan:

daveramsey.com/baby-steps

Notice that we do a baby emergency fund ($1k), quickly pay of all non-mortgage debt, save 3-6 months emergency fund/save a house downpayment and buy a house if feasible and start contributing 15% of income to retirement BEFORE we save a dime for college for children.

The Total Money Makeover book by Dave Ramsey talks about this in more detail.

(We are roughly following the Baby Steps and have no non-mortage debt, but I have to confess that we have started college savings without hitting the 15% in retirement. But it’s pretty darn close.)

1. Bear in mind that your financial resources may not allow for both private school and help with college. You may need to choose one or the other.
2. Be very cautious about high tuition, bearing in mind that many of your other expenses will go up and up–food, property taxes, medical, extracurriculars, etc. Years ago, I was enthralled with a preschool (!) that cost $10k a year. Now that I’m older and we have two children in real school for around $14k total, I think that that preschool would have been ridiculous (especially given our much smaller income at the time). We would have practically been forced to eat her craft projects.
3. If you’re going to economize, the elementary years are often a good place to go. We lived in DC for a number of years, which is famed for having terrible public schools, and yet there were actually quite a number of decent elementary schools and our daughter did fine in pre-K in public. (We left DC after that.) However, there was a lot of middle class flight from the public system starting in the upper elementary years (5th grade and definitely by middle school).
4. Also, while there are a lot of good public elementary schools and good public high schools, middle schools are often terrible, both academically and socially. That is where you need to be very alert. It’s such a bad idea to take children at the most vulnerable point in their lives (beginning of puberty), take them out of their familiar elementary school setting, and then throw them into a huge mega-school full of unfriendly strangers. Academic curriculum at this level is also often chaotic and poorly thought-out.
5. To your actual question, if you are determined to start with K or pre-K, there isn’t a lot of point in doing any fancy investing. You’re going to need that money really soon.

Good luck!

 

[Xantippe]

I also want to point out that tuition rates change and that even at the most prestigious schools there are scholarships available (both merit and need-based.) I don’t say this so you feel comfortable “slacking” on a goal, but just to note that the sticker price is not always reflective of what families are actually paying (and there are always the unseen expenses too, which I’m already finding just at the preschool level - class party funds, school supplies, not to mention the fundraisers, which are actually not so bad at our Catholic parish school in comparison to some of the stories I’ve heard. )

(Of course, here is also the obligatory note that you might change your mind about the school or you might need to make another decision for other reasons, and that in no way means your child will fail at life. $28,000/year is steep, even at the college/university level. Though it would be nice, if you did end up making alternative arrangements, and you had that money saved - it could go to quite a lot!)

Right.

I especially agree with the need to allow for changes in tuition. Our kids’ school is relatively new, and over the 8+ years we’ve been here, they’ve been working out the kinks in their financial model. The original model was “teachers work for almost nothing,” which contributed to a lot of staff turnover among young teachers that didn’t have kids in the school. While our school is now on much surer financial footing and has an aggressive (but realistic) expansion and building plan, the tuition is way higher than when we started.

 

[E_7]

Just adding that the school starts at 3rd grade, and that we will do Seton Homeschooling from pre-k to 2nd grade, or pre-k to 2nd grade in our parish private school.

We are completely debt free, but we live rented.

I’ll reread the posts again.

 

[pianistclare]

Also, keep in mind that fancy private schools don’t necessarily offer the best education.
They tend to offer the most “sheltered” education.
I would tour most of the schools in the are and make a realistic list of expectations vs. what they actually deliver. Don’t assume that non-Catholic schools re low on morality, and don’t assume the Catholic schools have a big focus on devotions and Catholicity.

Each one is unique, and what each promises, is not necessarily what they deliver.

Examine your reasoning for wanting the private school you have chosen. Is it their college acceptance rate? Their academics? The peer groups?

My daughters went to Catholic schools, all the way.
Great education, but socially, they were always with uber rich kids. It’s only now that they don’t feel slighted 24-7 for not getting a car for their sweet 16, not having parents who buy them apartments for out of state College, parents who didn’t send them to Paris for the Senior trip.
It was hard for them to be smart, but alone most of the time. The rich kids couldn’t be bothered with someone who didn’t run in their same circles.

They’re good Catholics, but they learned the HARD way, that $$$ doesn’t matter, although it sure does help. We’ve always struggled financially. Sometimes I wish we hadn’t spent all that time wondering how we were going to pay tuition. I worked at the Catholic school. No discount. We found that many non-Catholics got financial aid over the Catholics. The school figured it needed to branch out to non-Catholic families. They also figured that the Catholic families would live on rice and beans to have their children attend.
If I had to do it over again…I might have sent them elsewhere.

 

[Millie123]

You can open a coverdell esa for him. It’s an education account kind of similar to a 529 but the difference is 529 can only be used for secondary education like college or trade school. But coverdell esa’s can be used for private school tuition from kindergarten all the way through college

 

[WT1]

529 Plan. You need to check the State Income Tax deductions where you live to see if the one you pick qualifies as tax free.

For example I live in Alabama and there are state sponsored 529 Plans where the income you pull from the plan is not taxable on the Federal or State return. However had a chosen a plan outside the state sponsored plan the income would be taxable on the state return.

Also if you have multiple children there is no reason to set up multiple plans (mistake a lot of people make) because balances from one can be used by multiple children. This can save a little on administration costs and makes funding a little easier as well.

The only alternative really at this point is if your state has some type of guaranteed tuition repayment plan that they offer that is based on monthly payments but most of those plans have folded.

If your child is 3 years or less away from going to college I would probably just put the money in a money market and keep it out of the stock market completely. Please note that a 529 does invest in the stock market so there is risk but long term games usually offset the risk but you don’t want to be in the market under a short term scenario.

Hope that helps.

 

[WT1]

Also, keep in mind that fancy private schools don’t necessarily offer the best education.
They tend to offer the most “sheltered” education.
I would tour most of the schools in the are and make a realistic list of expectations vs. what they actually deliver. Don’t assume that non-Catholic schools re low on morality, and don’t assume the Catholic schools have a big focus on devotions and Catholicity.

Each one is unique, and what each promises, is not necessarily what they deliver.

Examine your reasoning for wanting the private school you have chosen. Is it their college acceptance rate? Their academics? The peer groups?

My daughters went to Catholic schools, all the way.
Great education, but socially, they were always with uber rich kids. It’s only now that they don’t feel slighted 24-7 for not getting a car for their sweet 16, not having parents who buy them apartments for out of state College, parents who didn’t send them to Paris for the Senior trip.
It was hard for them to be smart, but alone most of the time. The rich kids couldn’t be bothered with someone who didn’t run in their same circles.

They’re good Catholics, but they learned the HARD way, that $$$ doesn’t matter, although it sure does help. We’ve always struggled financially. Sometimes I wish we hadn’t spent all that time wondering how we were going to pay tuition. I worked at the Catholic school. No discount. We found that many non-Catholics got financial aid over the Catholics. The school figured it needed to branch out to non-Catholic families. They also figured that the Catholic families would live on rice and beans to have their children attend.
If I had to do it over again…I might have sent them elsewhere.

I’m a convert and have only been Catholic for two years and have two daughters 9th & 11th grade who go to a very good public school. I’m not sure how I would have put them through Catholic schools but it would have been awesome if they would have had the opportunity and enjoyed the faith teaching. I admire the dedication of so many Catholic families that sacrifice in order to provide a Catholic education for their children. I haven’t found anyone that regretted that choice.

 

[pianistclare]

I’m a convert and have only been Catholic for two years and have two daughters 9th & 11th grade who go to a very good public school. I’m not sure how I would have put them through Catholic schools but it would have been awesome if they would have had the opportunity and enjoyed the faith teaching. I admire the dedication of so many Catholic families that sacrifice in order to provide a Catholic education for their children. I haven’t found anyone that regretted that choice.

I have. You must have had access to a really good school. They are out there. I taught at this school. I know what they taught and didn’t teach.

 

[WT1]

I have. You must have had access to a really good school. They are out there. I taught at this school. I know what they taught and didn’t teach.

My family has been blessed in that department and my wife is an educator with substantial resources for areas where the schools were lacking. I’m very grateful to God for all he has provided.

 

[Usige]

1. Bear in mind that you may have more children sooner than you expect, so you may find that you can’t go on with private school and have to withdraw.

That is certainly something I would keep in mind. Planning for one or two isn’t horrible (until high school), but if you end up with 3 or 4 in school at once savings can quickly become nearly impossible. If my 5 youngest were all in private school we would be looking at somewhere in the neighborhood of 50,000 per year when we had 2 in high school and 3 in elementary. Schools in my neck of the woods give a small discount for each additional child, but tops out at about 8% for the 3rd and more children.

 

[pianistclare]

My family has been blessed in that department and my wife is an educator with substantial resources for areas where the schools were lacking. I’m very grateful to God for all he has provided.

 

[Maximilan_Kolbe]

Someone mentioned the Coverdell ESA, here is some info:

irs.gov/publications/p970/ch07.html

What I did was talk to my financial advisor and had him open what is called a custodial account for each child. I had him recommend a low-risk, low-yield fund to invest any tuition money in. If you start early enough, 5 years of interest is decent, even with low rates. There are also fixerd-rate funds that offer even greater protection. I bascially told my advisor "I don’t care if I dont’t make any money, but I absolutely cannot afford to lose any.

It is expensive, as tuition for the authentically Catholic schools with quality education as well is anywhere from $8k-$12k for k-8, and $13k+ for high school. Not every authentically Catholic school has a good education program, and not every high-end pricey Catholic school promotes authentically Catholic values. Finding both was key for us.

529s are only for college education, IIRC. We set them up through the state as well, but they won’t be touched until college.

 

[1990Domer]

We wish our son attends a private school we have been looking into for quite some time. We, especially myself, have our eyes set on that school in particular. It a bit expensive in the eye, but affordable to us especially if I get a job. Doesn’t matter the pay as long as I earn a minimum of 28,000 per year which is the highest cost (high school grades tuition costs more than elementary and middle school) of one academic year of high school level. And 44% of students receive financial assistance.

My son is almost 7 months old and I really want to start saving for his education as soon as possible so that I can rest assured that we will afford all grades until he goes to college. We can try saving small amounts now until I get a job (if ever…).

My question is, what is the best thing to do for saving money to pay for my son’s elementary-high school years? Just a savings account? a 529 -]college /-]savings plan?

1. Coverdell ESA
2. Roth IRA…can pull contributions tax free. Only earnings are taxed.

Sage advice. I felt the same way when my son was born. He was going to attend Notre Dame come heck or high water. You could imagine how rocked my world was when he diagnosed on the autism spectrum. The prognosis was not good. ALL our school savings was spent in two years for private therapies. Thanks to the many prayers and hard work, by goodness the kid is smart enough to get into Notre Dame. Chuckle: he wants to be a Notre Dame priest!

My best advice? Enjoy him. He is on loan by God. Save for your personal retirement first (fully fund it if you can) and worry about school second. Life is too short!

 

[1990Domer]

Also, keep in mind that fancy private schools don’t necessarily offer the best education.
They tend to offer the most “sheltered” education.
I would tour most of the schools in the are and make a realistic list of expectations vs. what they actually deliver. Don’t assume that non-Catholic schools re low on morality, and don’t assume the Catholic schools have a big focus on devotions and Catholicity.

Each one is unique, and what each promises, is not necessarily what they deliver.

Examine your reasoning for wanting the private school you have chosen. Is it their college acceptance rate? Their academics? The peer groups?

My daughters went to Catholic schools, all the way.
Great education, but socially, they were always with uber rich kids. It’s only now that they don’t feel slighted 24-7 for not getting a car for their sweet 16, not having parents who buy them apartments for out of state College, parents who didn’t send them to Paris for the Senior trip.
It was hard for them to be smart, but alone most of the time. The rich kids couldn’t be bothered with someone who didn’t run in their same circles.

They’re good Catholics, but they learned the HARD way, that $$$ doesn’t matter, although it sure does help. We’ve always struggled financially. Sometimes I wish we hadn’t spent all that time wondering how we were going to pay tuition. I worked at the Catholic school. No discount. We found that many non-Catholics got financial aid over the Catholics. The school figured it needed to branch out to non-Catholic families. They also figured that the Catholic families would live on rice and beans to have their children attend.
If I had to do it over again…I might have sent them elsewhere.

I have to agree. The Catholic grammar schools we have toured seem full of entitled Gen Y kids who don’t give a hoot about their religion. Plus the were snotty, especially during Comfirmation preparation.

My kid will stay in cyber school for 7-8 grade. There is an all boys school that has a program designed for kids with disabilities like mine. We hope their mission doesn’t change.

 

[pensmama87]

Maximilan Kolbe:

It is expensive, as tuition for the authentically Catholic schools with quality education as well is anywhere from $8k-$12k for k-8, and $13k+ for high school. Not every authentically Catholic school has a good education program, and not every high-end pricey Catholic school promotes authentically Catholic values. Finding both was key for us.

I would not say those figures are universal. Much would depend on region and other factors. There are a few parishes around here that have tuition-free K-8 schools, and I could send 4+ kids to our parish school for $8000 (granted, the first would take up about half of that.) The school is academically sound and authentically Catholic.

High school is pricier, but still lower than $13k.

That said, we are planning on public school. Ours are very good. For a while I was attached to homeschooling but after my children got a bit older and I got to know myself better as a mother, I realized that it wasn’t likely to suit us. I know that I could if I had to. We could also probably scrounge up tuition for the parish school if we absolutely had to, but in the meantime I’m glad my son and I can walk to kindergarten next year.

 

[Catholic1954]

We wish our son attends a private school we have been looking into for quite some time. We, especially myself, have our eyes set on that school in particular. It a bit expensive in the eye, but affordable to us especially if I get a job. Doesn’t matter the pay as long as I earn a minimum of 28,000 per year which is the highest cost (high school grades tuition costs more than elementary and middle school) of one academic year of high school level. And 44% of students receive financial assistance.

My son is almost 7 months old and I really want to start saving for his education as soon as possible so that I can rest assured that we will afford all grades until he goes to college. We can try saving small amounts now until I get a job (if ever…).

My question is, what is the best thing to do for saving money to pay for my son’s elementary-high school years? Just a savings account? a 529 -]college /-]savings plan?

If it was me, I would open a savings account with a credit union and buy savings certificates every so often to boost the interest rate. I am very distrustful of any government sponsored savings plan, especially for education. If you start now with $100.00 a month, you can reach your goal in no time.

 

[1990Domer]

If it was me, I would open a savings account with a credit union and buy savings certificates every so often to boost the interest rate. I am very distrustful of any government sponsored savings plan, especially for education. If you start now with $100.00 a month, you can reach your goal in no time.

With interest rates being so low, the power of compounding is essentially lost. This is sad. However, with the economy, I feel it more urgent to have more like a 6-9 month emergency cash reserve and fully funded retirement. The Affordable Care Act and drastic change in insurance coverage is another disaster waiting to happen.

 

[E_7]

Great recommendations, thanks! I’ll take a deep look to Dave Ramsey. He mentions

Two smart ways to save for your kids’ college are 529 college savings funds or Coverdell ESAs (Education Savings Accounts). These are both tax-advantaged savings vehicles that let you save money for your kids’ education expenses. As with retirement, you can also spread the money across the four types of mutual funds: growth, aggressive growth, growth and income, and international.

Both 529 plans and ESAs allow you to save money in an individual investment account. But do your homework first! Depending on your income and what state you live in, a 529 might be better than an ESA.

And I just noticed they changed their website and now they have a new budget tool for free (it is not the gazelle one) and looks great!. I’m using it right now. Yay.