How We're Saving for Emma's College Education

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Mitch here! It’s been a while. Missed you guys. 😉

Recently, Kelly wrote this post about lessons learned from five years of blogging. In it, she touched upon the importance we’ve placed on allocating money for retirement, health insurance, emergency/rainy day funds, and college costs. In this post, though, I want to dive a little deeper into that last one: Emma’s education savings, and how, exactly, we’re planning for that. Because YIKES. It can be overwhelming for parents. I know it’s been for us!

Note: Let it be known that it took us a considerable amount of time to come up with plans for all this stuff. Don’t freak out if all your ducks aren’t in a row yet. It’s a process, and the hardest–and easiest–part is starting!

How We’re Saving for Emma’s College Education

When Emma was born, Kelly and I had a conversation about how we wanted to go about saving for her college education. My parents had a similar conversation when their children were born, and they had it while sitting around a similar table in a similar home just a few blocks away from us. (Adorable, I know.) Despite the fact that they were struggling, they decided to put away a certain amount of money every month for me. My mom took on extra hours to make ends meet, and we lived frugally.

As I packed my bags for school as an 18-year-old kid, I didn’t really understand what a huge gift my parents had given me. But I do now, and I thank them every chance I get. When I graduated from college, I wasn’t riddled with student loan debt, and therefore was able to live and teach in New York City and save for a down payment for our first home in Chicago. Don’t even get me started about the cost of a college education today, but it is what it is for the time being, and the sacrifices my parents made propelled me into adulthood and gave me a leg up on life. I’m so grateful, and Kelly and I want more than anything to give Emma that same leg up.

But how?!

Today, I’m teaming up with COUNTRY Financial to discuss specific things that are actually achievable for parents–no matter what financial situation they’re in. I don’t know about you, but when I first saw the projections about what college will likely cost in 2035, I was terrified, and couldn’t imagine saving enough to cover it. But it is possible. If we break things down into three manageable steps, things become a lot less terrifying, too! (Click here to see how COUNTRY Financial can help you achieve your financial goals, btw.)

Here we go:

1. Calculate tuition costs & monthly payments

For us, the easiest way to start was to change our mindset about college savings, and simply think of it and treat it as another monthly expense, like the internet bill or car payment. (Except multiplied. 😳) Yes, the grand total is scary, but when you look at the monthly payment, it’s not that bad.

Next, we determined what monthly dollar amount we were on the hook for. This was slightly more challenging. There’s a great deal of literature out there, lots of projections based on trends, and tons of different opinions about what higher education expenses will look like in the future. Additionally, there’s a big disparity between college expenses associated with four-year public and four-year private universities at this point in time.

COUNTRY Financial was a huge help here. We determined that right now, the average annual college tuition for a four-year, in-state public university is about $23,700, and the average annual tuition for a four-year private university is roughly $48,900. Accounting for a college price inflation rate of 3 percent, that gave us a good prediction of what college could cost in 2035: an average four-year grand total of around $168,800 for a public and ~$348,000 for private.

Of course, we don’t know where Emma will end up going. Maybe she’ll go in-state to my alma mater, the University of Illinois, which would likely be more affordable. Maybe she’ll receive financial aid options. Or maybe she’ll go elsewhere. Or maybe she won’t go at all.

Side note: I could write a whole post on why I think that “college” as we know it will eventually become obsolete and replaced by something entirely different that costs far less than it does now, because tuition prices are currently out of control and the surge can’t continue. That said, it hasn’t happened yet, and we want to be prepared either way.

Considering all of this, Kelly and I decided that to start, we would save for an amount somewhere between the public and private projections: $258,400. Accounting for a 6 percent annual return, this equates to about $670 per month until Emma packs her bags. After we started budgeting (see #3) and got used to putting that money away every month, we increased the number, knowing that we could also always decrease the number down the line if we needed to. We also put birthday and holiday gifts from grandparents into the account, as well as half of Emma’s blog and freelance earnings. (The other half goes into a different account for her.) This helps to pad the 529.

It goes without saying that this is such a personal decision, and one that will be different for every family because there are so many variables at play. The only reason we’re sharing numbers is because when Kelly and I first started researching this topic, we found articles to be very frustrating if they didn’t include specifics. Don’t think you’re doing something wrong if you’re saving more or less than we are. What’s most important is that you’re doing it.

2. Decide which plan works best for you

The three most popular funding options are starting a 529 plan, Roth IRA, or UGMA/UTMA account. COUNTRY Financial has a very easy-to-understand chart that compares these options here, which I’d definitely check out. But Kelly and I decided to go with a 529 plan (what most parents choose) because it made the most sense for us. Here’s why:

  • A 529 plan offers tax-free earnings growth and tax-free withdrawals when the funds are used to pay for qualified education expenses.
  • Many states let you count contributions to the 529 as a tax deduction.
  • There are no income limits. It doesn’t matter how little or how much money you make; everyone can open a 529.
  • You can transfer the money to another child or family member. So let’s say Emma becomes the next Taylor Swift, and decides that she’s not going to college. No big deal! We can transfer the money to another family member for education expenses (even to Kelly, if she wanted to go get her MFA!), or save it for a future grandchild.
  • If no one ends up using the money because my College is Doomed prediction turns out to be true, you don’t lose it. You can take the money out as long as you pay the taxes on it that you otherwise would have if you hadn’t put it into the 529 along with a 10 percent penalty.
  • If the student receives a scholarship or decides to join the military, the 10 percent penalty is waived.
  • It took 15 minutes to open the 529 and it was free. (Not why we chose it, but certainly worth noting!)

(Remember, you can explore other options here.)

For us, just opening the account was incredibly helpful because it at least made us feel like we were on the right track! You can’t open a 529 before the child is born, and the first few months of parenting were an adjustment for us. (We were more focused on staying awake than banking.) Because of this, we opened said account a few months after Emma was born, and made up for lost time by dispersing the “missing funds” over the following year. Want to get started? Call COUNTRY Financial.

3. Start budgeting

As I mentioned before, thinking about college savings as another monthly expense, like the gas bill, has been very effective for us. And Kelly taking on extra freelance work has also been helpful in offsetting the “bill.” More so, though, has been creating a budget. COUNTRY Financial has an amazing budgeting worksheet that is quick and easy to complete, and I can’t recommend it enough.

Kelly wrote a post a few years ago about how we save money in certain areas of our budget, and for the most part, this is still how we run our lives. But I think living below our means has made the biggest impact. I know that sometimes it can seem like we spend a lot, but keep in mind that we regularly partner with companies to feature products, and every purchase we make is calculated.

For example, if Kelly purchases a skirt to wear on the blog, it’s because she loves it but also because she thinks her audience will love it and the return will be greater than the cost. If the skirt costs $50, for example, the idea is that the ROI will be higher than that $50. Pretty awesome job, for sure. Side note: I only learned that there was a difference between skirts and dresses once I started dating Kelly. Dresses go over your shoulders and vary in length; skirts start at the waist and also vary in length. Who knew?

Anyway, we choose to live below our means on a daily basis so the monthly 529 payment doesn’t kill us. We’ve chosen to live in a small home in a less expensive city, we own an old (but safe) car, and we don’t go on lavish vacations. (Most trips we take are either blog-related or to visit our families, and when we DO travel on our own, we utilize discount sites to keep costs down. We also sometimes drive instead of fly.)

We don’t have cable, we keep track of restaurant and bar deals so we can still go out while keeping our bills low, and we take public transportation in favor of Ubers and cabs whenever we can. (Also a safety measure when you have a toddler.) You can read Kelly’s whole post here, but we also sell our old stuff, do our grocery shopping online or at discount stores like Aldi and Trader Joe’s, and buy in bulk from eBay and Amazon.

I won’t pretend that this has been easy. But because we’ve adjusted how we live our lives to account for the extra money, it hasn’t killed us. Which is nice because I enjoy being alive. Once in a while we’ll splurge on something, but we just generally try to make smart decisions.

What small steps are you taking to save for college?

It’ll be another 16 years before our little Emma unpacks herself into a dank dorm room with junky plastic closet organizers while her spaz of a roommate looks on. Those spazzy roommates are always looking on, aren’t they? With any luck, though, the steps we are taking today will one day add up to an incredible collegiate experience and a great life.

Thanks for reading, guys. We put ourselves out there a little bit by getting into the specifics of our plan, and did this to help, not hurt. (I’ve always found articles that are too general to be annoying.) In the comment section below, please leave any advice regarding your children’s college savings or any helpful small steps you’re taking to achieve your goals!

Mitch. OUT.

In collaboration with COUNTRY Financial; all opinions are my own. As always, thank you so, so much for supporting the partnerships that keep Kelly in the City up and running!