College savings looking positive

I shocked myself yesterday when I figured out how much money my son has. Who knew I was feeding and clothing a little tycoon? Technically, of course, the 529s are not his money.

Maybe he won't need that 529 money. He could:

not go to college at all

be so talented, smart and lucky that he gets a full tuition scholarship

have a parent who manages to land a university job with tuition remission at a school that's right for him

become a child star (except that his mother would never be willing to sit through all those rehearsals or deal with his little ego)

inherit a hell of a lot more than expected

If he doesn't need it, there will be a big battle in my own mind while I decide whether to take the 10% penalty and reclassify all that money as retirement savings, or whether to transfer the accounts so I'm the new beneficiary and go get that impractical MFA I've always wanted.

But it's more likely that he will go to college, and that he or somebody who loves him will have to pay for it. According to JLP's super cool College Tuition Estimator, his current nest egg of $8222 will be worth just under $21,000 when L goes to college if we don't add to it and if it grows at a rate of 6%. That might be enough to pay for most of one year at a state school. If we're talking about a liberal arts education, well, little L is going to have to borrow some serious money.

For a while now, I've had the loose goal in mind of trying to save enough for about half L's college tuition by the time he starts school. So it looks like I'm not doing too badly.

After tinkering with JLP's calculator, I've figured out that we'd need to save an impossible $600/month, starting right now, to pay for four years of a liberal arts school's projected cost in 2021. But we'd only have to save $200/month to pay for four years at a more modest public university.

If we're only trying to save enough for HALF of his education, the number drops to $100/month. We're saving $75 right now. That's not out of the ballpark, especially when I remind myself that those little gifts from the grandparents, $100 here, $50 there, will probably continue to roll in. So $75/month is actually a fairly adequate amount to be saving for college, and I can just RELAX already.

Which leaves me free to put all my energy where it belongs: on ramping up our retirement savings.

Technically I shouldn't even be saving as much as $75/month for college. If I have a spare $75 in my budget, it should go straight to our retirement accounts, because we're just a little bit behind. But I set up the autodeposits to our college accounts to avoid annual fees, and I must say, I'm glad to have that as an excuse to save at least a little bit for college.

I'm glad to see that we're at least on track to pay for two years at a state school. And if he wants to go to NYU or some other expensive school, well, then I'll just have a serious talk with him to make sure he understands the implications of taking on all those loans.


Related post:
Long term financial goals: College