Before hiring a financial planner they reviewed on Angie’s List, the Richfield, Minnesota, couple was putting about $450 a month into a 529 college savings plan, but Nathaniel says he didn’t know if that would be enough to pay half of their kids’ college educations.
“We were completely unrealistic at the current level,” Lindley says, adding that the couple plans to at least double that amount. “[The financial advisor] adjusted how much we should be saving if we wanted to pay for half of college, and he suggested that it could be achieved this way.”
The Lindley’s financial advisor, Greg Ferguson, with Ferguson Financial in Minneapolis, says many parents insist on paying for their kids’ entire college. He says that can be an unwise choice, as it can leave parents with little savings for retirement or other expenses as they become empty nesters.
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“You can borrow for college, but you can’t for retirement,” Ferguson says. “If the kid doesn’t have any skin in the game and isn’t planning on paying any back in the future, it makes it harder on the parents. The reality is parents often don’t have enough money and need to realistically think about what they’re willing to afford.”
Siegel says he’s seen parents pay for expensive private schools and end up broke. But he’s also seen people not save at all.
“Some people are under the impression they don’t have to save for college,” he says. “It’s just too expensive for them. They think somehow it will get paid for, and that’s a big mistake.”
Although it’s important for students to first apply for financial aid and seek out scholarship opportunities, there’s no guarantee either will be available when a child is ready for college.
Financial experts say even a little savings can eventually turn into a lot.
According to Federal Student Aid, an office of the Department of Education, putting away just $14 per week in an account that earns 1-percent interest will earn you more than $12,400 after 17 years.