My daughter turned one this past winter and as her first birthday began creeping up I started feeling the need to really get serious about saving for her future education expenses.
As many of you, I have hefty student loan debt from private universities. Because of this I worry about the future costs of college expenses for my daughter and wanted to ensure she wouldn't be in the same situation.
My first step to understanding what her expenses would look like in the year 2034 was to estimate the tuition, room and board costs as well as fees. I found an online calculator to help me with the estimate. At this point I thought this will be easy the calculator is even called “World’s Simplest College Saving Calculator” I simply put in my child’s age (1) and then submit. That’s it voila, the following report popped up…easy right?!
The assumption here is that my child would be attending a 4-year college that would cost $25,000 annually at the current rate. I would be paying 100% of the 4-year costs and the total would be approximately $206,792,000.
Now that easy calculator got me thinking about these numbers. Was the yearly cost of college at $25,000.00 realistic, that number seemed fairly low to me since the estimate did not presume financial aid would be given.
I decided then to recalculate the result with a specific college in mind. I put in my alma mater, decided I would only try and save 50% of the projected costs because anything higher made my stomach hurt and I hit submit once again.
These results seemed more realistic in terms of what I would need to save to give my daughter some funds towards college and hope that she is able to get scholarships or financial aid to fund the rest. (Better start those Baby Einstein books now :-) or better yet she can start working now, anyone hiring a 16 month old!???!!!
At this point, you may start feeling panic at that number listed for the total projected costs for a 4-year private university, $385,000.00 is a mortgage or in my case way more. I don’t think your panic will subside with knowing you would only be responsible for $192,500.00 of that because that is by no means a smaller number, maybe the first one makes you cry and the second one only makes you whimper.
To ease that panic I threw in another option, if my daughter were to go to a community college for two years (like I did) that would help offset some of the cost. I plugged in some numbers and the handy calculator gave me some less panic inducing results.
Ok, now we are getting into way more realistic territory. If my daughter decides to go to a 4-year private but does the first 2 years at a community college then the total projected costs would be approx. $185,000.00 then let’s say we are only responsible for 50% of the cost. Our monthly amount to be put aside and saved lowered itself to $244 a month. That may still seem completely unrealistic for some families but the key is that some savings hopefully in the long run is better than none. You watched my above estimates for what might work for my family in deciding how we want to save for our daughter’s education. Would I love to be able to save $905 a month to cover the full cost of a private 4-year degree, absolutely, but it is not realistic at this time.
The first step before diving into finding that savings account is to realistically set expectations for yourself and your family regarding where you are now in your finances. It is easy to feel guilt over not saving enough for your child’s future but the truth is teaching them financial literacy skills is more vital than what you can save, by starting to understand your own finances and how savings can change your family tree you are building a better financial future for your kids.
Feel free to go plug in some numbers into that oh so easy calculator...
Coming Soon: Part two: Diving into college savings
Happy Mother’s Day,
From The Wisest Penny (a.k.a Rita)