Adjust Text Size

Saving for College

Written by Nickel - 5 Comments

I just ran across an article by Suze Orman on saving for your kids’ college education. Pretty run of the mill stuff, but good advice just the same. The take home lesson is that you need to prioritize your investment needs, and that you shouldn’t rank saving for college ahead of some other critical areas.

According to Orman:

“You need to listen up here: You must take care of your other financial needs before you save one penny for your kidsâ€™ college educations. That means getting rid of your high-rate credit card debt, contributing enough to your 401(k) to get the maximum company match, saving up for a home if you donâ€™t yet own one, funding a Roth every year if you meet the income eligibility requirement (under $95,000 for a single tax filer, $150,000 for married couples filing a joint return), and saving up an eight-month emergency cash fund. And when all of that is done, go back and max out on your 401(k) contribution and save a bit more for retirement in a regular taxable account.”

While opinions vary on issues such as the size of your emergency cash fund (eight months is on the high side of most recommendations), Orman makes a number of good points, particularly with regard to retirement savings… After all, your kid(s) can always get financial aid to help pay for college, but the same can’t be said for your retirement.

Disclaimer: Discover is a paid advertiser of this site.
Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.

Published on May 13th, 2005
Modified on April 23rd, 2009 - 5 Comments
Filed under: Education, Saving & Investing

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

5 Responses to “Saving for College”

1
Cap Says:
May 13th, 2005 at 9:21 am
that seems to be a total rip from an article I read on Motely Fool, http://www.fool.com about a year ago…

:\

it said the same thing you said too “It may sound selfish, but there are financial aid, scholarship, and student loans for your kid’s tutiion. There aren’t any of that for your retirement!”
2
LibraryLady Says:
May 13th, 2005 at 11:30 am
Speaking as someone who paid for her entire college education (because my parents could only afford to give me minimum help), I’m glad I did it that way. Kids who have to take a large part in their college expenses getwhy they’re there and don’t think it’s a 4 year all-expenses–paid-by-parents-party!
3
The Complimenting Commenter Says:
May 14th, 2005 at 4:40 pm
Interesting post. Great to keep things in perspective and not ignore one aspect for another. Thanks for the tips.
4
Dan Davenport Says:
February 22nd, 2006 at 1:12 pm
I could not agree more. I would also add that a college savings product should be safe, match college inflation and provide tax benefits.

I would also suggest achieving some of your goals concurrently. In other words, you can save for college while saving for retirement. something to think about as they are both important.
5
karen Says:
June 30th, 2011 at 8:09 pm
My husband and I saved for college since our two children were born. With additional help from grandparents, both were able to attend private college and we paid cash. Great, you say? Not really. We make an average living. Because the money was already available for the kids, in their names, it made them ineligible for any grants or financial aid. You might ask why would that matter? It didn’t matter to us at the time. But now, ten years later, we have many friends who are sending their kids off to college. These friends also make a good living; however, they never saved a dollar toward college. But they own their homes outright and go on great vacations and drive expensive cars (we don’t, of course, because we were busy saving for college). Ironically, they are eligible for all sorts of grant money and aid. In the end, it doesn’t seem fair to us. I don’t recommend saving money for college at all. I wish we had put the money under a mattress and given it to our children after they graduated.

Top Cards by Category

CASH BACK CREDIT CARD (see all)

Blue Cash Everyday^® Card from American Express

Earn 100 Reward Dollars after you make $1,000 in purchases in the first three months of Cardmembership.

AIRLINE MILES / REWARDS POINTS CREDIT CARD (see all)

The Platinum Card^® from American Express

Earn 25K Membership Rewards(R) points after you spend $2,000 during your first three months of Card membership.

CREDIT CARD DEALS (see all)

Simmons First Visa^® Platinum

Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.

BALANCE TRANSFER CREDIT CARD (see all)

Discover it^®

The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*

LOW INTRODUCTORY RATE CREDIT CARD (see all)

Discover it^®

LOW INTEREST RATE CREDIT CARD (see all)

Simmons First Visa^® Platinum

Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.

BUSINESS CREDIT CARD (see all)

The Business Platinum Card^® from American Express OPEN

Limited Time Offer: Get 25,000 Membership Rewards(R) points after you spend $5,000 in the first three months of Card membership. Enroll and select a qualifying airline to receive up to $200 annually in statement credits for incidental fees, such as checked bags and in-flight refreshments, charged by the airline.

STUDENT CREDIT CARD (see all)

Discover it^® for Students