photo credit: Eva the WeaverOne topic that I have never mentioned on PFI is opening up a 529 College Savings Plan for your children. I have two young boys who are ages four and one. Just before each of our children were born, my wife and I opened up an account through Fidelity with an initial investment of $500 each. Every month we have $250 invested into each account ($500 total) automatically from our checking account. Obviously over time, this money adds up and should put our children in a great position when they are ready to go to college. It will also put my wife and I in an excellent financial position as we are planning ahead for this expense. I know that some parents disagree on what they should help their children pay for once they are over eighteen and have graduated high school. My wife and I were fortunate enough to both have parents that helped pay for our Undergraduate degrees. We both actually have Master’s degrees that we paid for ourselves which helped us realize the importance of saving for this expense.
I am actually amazed at how many parents don’t plan ahead for college expenses after talking with neighbors, friends, and family. As I mentioned earlier, some parents disagree with paying for the child’s college education which is totally fine. I have many friends who had to pay their whole way through college. I also have many friends who dropped out whose parents paid for all of their college. The point is that parents who want to pay for this expense or at least a portion of it need to plan ahead.
One point that I would like to stress is that I personally don’t believe in paying for 100% of my kids secondary education. I think one of the most important lessons that young adults can learn from college is personal money management. I believe that they should hold down a part time job and help to pay for things like spending money. Going to college is where I learned how to budget my money and become financially responsible. At the same time, I don’t want to burden my children with all the stress in trying to come up with thousands and thousands of dollars to pay tuition and other related expenses. That is why my wife and I have opened up accounts for both of our children.
With all the volatility in the stock market and economy lately, I am sure that parents are not really thinking too much about college savings. However, now is the time to take action if you haven’t already done so. Just as you can find great bargains in the stock market, you can now get into a 529 plan at incredible prices. Unfortunately, these low prices have sent our oldest son’s account down 15% since it was opened almost 5 years ago. I actually was upset the other day when I looked at it. Just one year ago, he was up about 18% through 4 years. That is a huge swing! Fortunately, he has many years for the account to build back up and now we are buying cheaper shares each month with that $250 investment. That is why it is extremely important to not panic and keep with your long term goals. Now is the time to step up and take advantage of the stock market collapse!
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