Mommy Confession #3: College Savings Plans

The Keller Family enrolled the Keller Kids in college savings plans this year!  One of our main goals at the beginning of the year was to finally get started on the children’s college savings plans.  Frankly, the cost of college in 18 years is frightening!  Heck, the cost of college this year is crazy!  According to Saving for College, the cost of attending college for 4 years at a 4 year state university is currently $39,400.  In 18 years, those costs are projected to be $94,800.  If that’s not enough to make a parent nervous, I don’t know what is!

College Planning

Planning now for their college! It’s not that far away!

Shortly after BK’s birth, Mr. Keller and I discussed our plan for college savings.  We determined that we wanted to help our children with college, but we wanted them to have some skin in the game.  We agreed that we would pay for 2 years of state university–or the equivalent.  Should the children obtain scholarships that cover 50% of their costs, we will cover 100% of what remains.  That still leaves a lot of cost for Mr. Keller and I to cover!

Knowing that, I did one of my favorite things:  research!  The 2 main options that I looked at was private investing in the stock market and bonds or a 529 plan.  The 529 plan won me over pretty quickly. The main benefits include:  the money grows tax free as long as the funds are used on education related costs, left over funds can be shifted to the sibling, the funds can be used at out of state schools and some technical schools, my deposits as the parent are not limited, grandparents and great-grandparents can also invest, and we can (and did) schedule automatic deposits into each child’s account on a monthly basis.  Basically, as long as both of our children attend some sort of after high school education, their funds can be used!

We signed up for the Illinois Bright Star plan.  It was ridiculously easy.  Everything was done online, and they offer quite a few low cost index funds.  Easy and low cost!  What more could you ask for?  For more information, you can check out the Bright Starts FAQ page here.

While I’m a little bit embarrassed that we waited so long to sign up for college savings plans for the kids!  We talked about setting up a plan since the day BK was born, but it was just one of those things that we knew we should do, and we agreed that we would, but we just hadn’t done it!  I think that we thought it would be more complicated than it was.  We didn’t have to go into a financial adviser’s office to set it up, and, honestly, I think it took less than an hour to get it all going.  Now, everything is on auto pilot!

If I could give advice to any new parent, it would be to enroll your child in a 529 plan as soon as your child has received their social security number.  We invest $150/child today per month.  Had we invested that $150/month for BK starting the day he was born and assuming a 7% average annual gain, BK would have nearly $7,000 more in his account.  It’s so important to take the time to set up the 529 plan.  Even if you only have $20/month to invest in your child’s college savings plan, it’s better than nothing!

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