Strategies for saving for college haven't been discussed much on Get Rich Slowly over the years. And yet student debt has been a regular and pressing problem for many. Saving before you get to college seems like an important financial step.
Reader Lynn K. wanted to ask the readers several questions about saving for college — for her coming nieces and nephews, not even her own children. How generous is that? So here are Lynn's questions for you:
My brother and sister-in-law are about to have their first child, and my husband and I would like to set up some sort of college fund for the child. Unfortunately, we're not sure where to start. The first question is: How much should we contribute? We don't intend to have any children of our own, so we can afford to pay quite a bit toward their child's education. However, what if they have four more kids? What if our other in-laws have several children? We want to be able to be fair without bankrupting ourselves, and we don't want to go through all the trouble if the money we contribute barely makes a difference.
The second big question we have is: How or where to invest the money? I've done some research and found 529 plans, but I'm concerned about how much control is lost with those plans (and where the money can end up) if the child in question doesn't finish college or chooses not to attend in the first place. Ideally, I'd like to set up something that allows my husband and me to distribute the funds once per year when the child is enrolled, or, if he or she chooses not to go to college, as a lump sum later in life. So how can we get a decent return on our investment and maintain control over the distributions?
The third and final question is a little stickier. My husband's parents also want to set aside money for their grandchild to get an education. They have inquired about combining efforts. They have a lot more money than we do and will almost certainly contribute more than we will, especially for the next five to 10 years. I am happy to share planning information and work together to set up accounts, but I am very hesitant to set up a single account that we both contribute to, because there's always some chance that we have differing opinions on how the money should be distributed and the last thing I want is to get into any kind of dispute over money where family is concerned. Do you think that the financial benefits (if any) and convenience of having a single account outweigh the risks of getting into a financial relationship with family? If not, how can I tell them about my misgivings without sounding like I don't trust them? On that last point, I do trust them, and I believe they make sound financial decisions; I just don't want to combine finances with anyone other than my husband.
When I've researched articles on saving for college, two of my go-to sources have been Joe Hurley's Savingforcollege.com, which provides a comprehensive look at 529 plans in every state and Q&A's on everything related to college savings, and Mark Kantrowitz's Finaid.org, which covers loans, scholarships, savings programs (including 529 plans, UGMA/UTMA custodial accounts and many other methods), and military aid. These will help you, Lynn, as well as anyone else who's starting to save for their children's — or someone else's children's — education.
So, readers, do you have any other tips or advice for Lynn and her husband?
Author: Ellen Cannon
Ellen Cannon was the editorial director of the financial services sites at QuinStreet from 2010-2015. She has covered personal finance for magazines and websites for more than 20 years, including five years as managing editor of Bankrate.com. She lives in South Florida with her kitty and sunshine.