Are college funds necessary?
June 30, 2006 1:20 PM   Subscribe

Are college funds necessary?

I have two kids (4 and 5), and I don't think I'm going to set up college funds for them. I nor my brother had any support from family through college, and we both made it though (grants, loans, scholarships, jobs!).

I'm just interested in other people's experiences and whether people think that if a college fund can be set up it should. At this point, I think it's more character building and teaches children about 'real-life' more to have to do it themselves.

Don't get me wrong, I love my children and will always be there for them, but I just don't think giving them 100K to go college when they turn 18 is the best way, or is it?
posted by patrickje to Work & Money (48 answers total) 8 users marked this as a favorite
There's no reason to feel guilty if you choose to forego the support. OTOH, why not have it both ways? Set up the fund but never tell the kiddies. Let them think they have to carry their own weight. If they turn out spectacularly (as they probably will) then you can surprise them. If they (against all odds) disappoint, you can use the money to tour Europe without them feeling like you withheld anything.
posted by trinity8-director at 1:25 PM on June 30, 2006

If you do end up setting up a "college fund" DON'T call it that. The reason being is that consideration for loans and aid the government comes up with an "expected family contribution," and while they only count a percentage of assets in coming up with this number, they could 100% of college funds. . . .

So basically you'd be saving money so that your kids would be less likely to get aid, etc.
posted by visual mechanic at 1:29 PM on June 30, 2006

Bear in mind that it is certain that college will be much more costly when your kids are going to school and (barring some fairly radical redirection of governmental policy on school funding) they will have significantly less access to financial aid than you and your brother did (I also put myself through college with very minimal support from my parents, who couldn't have afforded more than they gave me).

You don't have to pay their whole way but it might be worthwhile to do some investigation of college cost and funding projections, and think about offsetting possible higher costs through some of the financial vehicles available for this specific purpose.

My financial advisor always tells me the same thing: take care of today's needs (insurance, emergency savings etc.) first - so I have not started saving towards my 2-year-old's college fund yet, but I will within five years (but I certainly don't intend to hand him a free ride or ever give him the impression he has a chunk of no-strings cash parked for his 18th birthday).
posted by nanojath at 1:36 PM on June 30, 2006

Personally, I'm trying to plan on paying for half of their college expenses, while secretly hoping they get scholarships that make my help necessary.
posted by COD at 1:38 PM on June 30, 2006

If you have money for college, you can pick the school that inspires you, not the one you can afford.

You can take that unpaid internship that might lead to a dream career (or teach you that you don't actually like your dream job), instead of working retail.

You can spend time studying and networking, instead of having all your spare time devoured by work.

Sure, it's possible to put yourself through school. If your parents can't help you, it's a noble task indeed. But it's certainly not the ideal reality.
posted by Tacos Are Pretty Great at 1:41 PM on June 30, 2006

Patrickje, can you afford to set aside a couple thousand dollars a year for your kids for a few years? It will make an enormous difference if you do this now. The money will have a chance to grow. The sooner you start the better.

If you really want to teach your kids a lesson about the value of money, have them reimburse your for whatever your cost-basis is once they come of age. (In other words, if you invest $10,000 and it grows to $50,000, give them $5 for every dollar they pay you.) Or something.

But please consider the advantages of starting to save now. Compound returns favor the young.

Something else: Who says you have to tell your kids that you're saving for them? Just do it. If they deserve the money when they're older, give it to them. If not, don't.
posted by jdroth at 1:42 PM on June 30, 2006

A lot of colleges reduce their aid packages when a student receives outside scholarships.
posted by transona5 at 1:42 PM on June 30, 2006

What could you do with the money right now that's more important (other than saving for your own retirement)? My father's family passed on when I was young, and left money for me (and my sisters) to go to college. I am very greatful for the opportunities this money provided me- I always worked during college, to pay my other bills, but I didn't have to work as hard as my fellow students, some of whom had to work so so hard, or leave schools they loved because they couldn't afford to stay. I was able to do some things (take unpaid internships, transfer to a more expensive college in a big city) that other classmates could not have dreamed of. I'm a college graudate with no student loan debt (wow, just saying that reminds me of how blessed I am- thanks again, family).

I can't think of a less crass way of putting this- the more money your kids have, the more opportunities they'll be able to take advantage of. Simple as that (I worked for a company that helps rich kids prepare for college, so I really know this to be true). Not fair? You bet. Can kids get by without support from their parents? Sure. But if you have the chance to provide for them now, why wouldn't you?

(and to echo what nanojath said, I don't think you should give them a huge hunk of cash and say, here, spend as well- you can pay the tuition of wherever they go to school).
posted by ThePinkSuperhero at 1:43 PM on June 30, 2006 [1 favorite]

I was in your boat, patrickje, and made it through with loans/grants/scholarships and (sometimes multiple) jobs. It was a character builder, no doubt about it, but it also sucked and eliminated any ability for fun whatsoever. (Ramen noodles get really old when that's all one can afford to eat.)

I hated university, solely because it was so difficult to get by, and I consider it a real shame that I loathed what could have been a great time in life. My life would have been a lot easier with even the tiniest bit of parental support.

That said, I don't think your footing the whole bill is a good idea either. How about striking a 50/50 deal, when the time comes? Alternatively, depending on where your kids might want to go to school (I went to a private school, which was $35K a year), you can tweak this somewhat.

And yes, financial aid absolutely depends on the EFC, whether by college funds or otherwise.
posted by timetoevolve at 1:45 PM on June 30, 2006

Tacos Are Pretty Great writes "Sure, it's possible to put yourself through school. If your parents can't help you, it's a noble task indeed. But it's certainly not the ideal reality."

My marks would have been much better if I wasn't working 30 hours a week to support myself and pay for school.

In Canada the goverment matches 20% of the first $2000 per child per year (or more if your income is modest) so that is what we are trying to contribute every year. And if she gets a full ride or decides not to go to school we can use that money ourselves or transfer it to a relative.
posted by Mitheral at 1:52 PM on June 30, 2006

I can't believe anyone would consider having to work during college a good thing. They are in college to learn, not just to slowly acclimate them to the "real world". College should be a full time job if at all possible, and if not, their education (and happiness) will suffer.
posted by phrontist at 1:53 PM on June 30, 2006

Take care of today's needs first.

That being said, if you can afford it, it's valuable to help your children with college. My parents did not save anything for me. I had to work extremely hard in high school to pull off the grades necessary for scholarships. I also had to do a ton of volunteer work and work part-time. When I finished school, I still did not have enough money to go away to college. My parents made too much money for me to qualify for financial aid. I was only 17 and too young to get credit.

I had to stay at home and go to the local community college. This was a setting where most of the students were just wasting time and not at all focused. I was a strong student, but I felt really uncomfortable in an environment that was simply an extension of high school. Most of the bright students had gone to university, so I felt quite isolated intellectually. However, I made some friends and had a good time, in spite of all this.

After second year, I transferred to a university in a major city. I left behind all the friends I had made at the community college. Now I was in third year, which is still a hard time to make friends. I didn't have the money to go to any social events, like movies, restaurants, pub nights, etc. I had to work while I was going to school and it took me six years to finish my undergraduate degree because I had to alternate between full-time work and school. I was pretty much only able to connect with other university transfer students. This was okay from a social standpoint, but it really hasn't helped my career. I wasn't able to make many connections with people who lived in the city, knew the ins and outs of being middle class, or who were really motivated in their work and schooling.

I also had to live in poverty. I'm not talking about your usual student poverty. I didn't qualify for student loans. I lived on $500-$600 a month, including rent. I lived in sub-standard housing where there were threats to my safety. My neighbours at one apartment complex were prostitutes and drug dealers. I could go on and on about this. It was pretty scary.

However, I graduated without any debt and I had a lot of good work experience. It was hard to get going in my career because I didn't know how to be middle class, though. 10 years later, I'm starting to understand how it all works.

So I'm saving for my own children's education. I expect them to contribute and to go after scholarship money, if it's within their reach. But I don't want my kids to have to go through what I went through. I am only saving for tuition and books, though -- I expect them to live at home, since there are good universities here.

It sounds like your kids will be starting at a higher point than I did, though. So maybe you can reach a middle ground where you prevent abject poverty but still expect a serious commitment from them. And maybe your kids will qualify for loans or be able to live at home for all four years. I think you have to take all those things into account.
posted by acoutu at 1:55 PM on June 30, 2006

We have agreed to pay for two years at the main state university. They can take that money and go to four years at a more inexpensive state school or take the money and get a semester at a very expensive private school.

Neither of our parents paid for our college education, but we didn't want ours to have to do it all by themselves. By providing something we help them get off to a good start while still instilling the character development.
posted by zymurgy at 1:55 PM on June 30, 2006

Need-based financial aid is headed more and more towards loans and away from scholarsips and grants. And the eligibility to get any of the federally guaranteed loans (the ones with the terms that are only criplling, instead of deadly) or grants is determined by what the family can afford to pay - that they won't is not taken into consideration.

I wish my parents had been able to help me out. And I know how many opportunities I lost or bad choices I faced because I had no money. If I had lived the way I did knowing that they could help, but wouldn't....
posted by dilettante at 1:55 PM on June 30, 2006

The eligibility to get any of the federally guaranteed loans (the ones with the terms that are only criplling, instead of deadly) or grants is determined by what the family can afford to pay - that they won't is not taken into consideration.

This point is so important, it bears repeating.
posted by ThePinkSuperhero at 1:58 PM on June 30, 2006 [1 favorite]

but I just don't think giving them 100K to go college when they turn 18 is the best way, or is it?

I had friends whose parents paid all the bills for their educations. But they didn't just hand over $100k or anything - they had the tuition bills (or housing) sent to them, I think, and then doled out other amounts as needed.
posted by dilettante at 1:58 PM on June 30, 2006

I've been paying off my college loans for nearly 15 years. I've got a few more years to go. (I had to take out loans in addition to the scholarship money and grants I got from my university and my parents' contribution, as well as the work-study gigs and other jobs I held -- often two at a time -- during college in order to pay for my regular living expenses). And that was for a (admittedly very fine) undergrad education that concluded in 1991 -- I know that college expenses are astronomical compared to even what we paid then.

As a result of all that debt that I took on at 21, I entered my adult life with a huge economic strike against me -- I took on credit card debt that I couldn't afford in order to make my student loan payments, which snowballed into my ruining my credit for years. I didn't have a savings account or retirement plan until my 30s, because I didn't have the money to put into them. I certainly never saved up for a down payment on a house -- so now I live in one of the most expensive housing markets in the country as a renter. I don't mean to suggest that none of these things would have happened had I not had to take on my student loans, but certainly my financial well-being would have been improved.

And for what it's worth, my parents have said repeatedly that one of their biggest regrets is that they didn't create college funds for my sister and me when we were kids, precisely because of the situation I describe.
posted by scody at 2:02 PM on June 30, 2006

I did and am VERY glad I did. I started saving separate stock accounts -- under their SS numbers -- for both the the kids at age 0. Now I've sent my one boy through undergraduate school and he has enough to go for his masters or law school -- or for a nice down on a house. My other boy is just starting college this fall. I'll try to save for our grandchildren as well -- no GC yet though -- none married. I told them if they didn't go to college I would use the $ to send myself through flight school and buy a plane. I retired 2 years ago at age 49! Thank you very much :)
posted by orlin at 2:08 PM on June 30, 2006

PS -- I did have to take some $ out to pay off my own college costs -- paid it all of it off in less than 1 year. The BEST thing you can do for your kids is send them through college. I sent my wife through as well. She is a nurse and will retire at 55. Don't forget to go to a good estate planner, set-up a living will for your spouse and yourself. Diversify your funds heavily, watch the market, take good financial advice even if you have to pay big $ for it -- it's worth it.
posted by orlin at 2:14 PM on June 30, 2006

If you can afford to save money for their college education, I'd say do it. I have no hard data, but the relative cost of a college education seems to be rising at a tremendous rate. The amount of debt recent grads have compared with grads 10+ years ago is just staggering to me. It'll probably just get worse.

An extreme case: the former CEO where I worked, a guy who made tons of money, pushed his kid in school his whole life. The kid got into an expensive private school -- and then Mr CEO refused to pay any of the cost, out of the blue. To teach him about "the value of money" or something. For a while it was amusing to see a CEO's kid working the counter at In-n-out. But it just seemed cheap and uncaring. The father could certainly afford it. It led to the kid essentially hating his dad.

And be fair between your kids. If you dont pay for one and you do pay for the other, it will lead to resentment both towards you and between the kids.
posted by Spurious Packets at 2:17 PM on June 30, 2006

If you think that your kids will turn out spoiled because of you paying for their college education, please don't. I know people whose parents paid for everything, and people that had to take care of it all themselves (I myself was in the middle towards the "parents taking care of everything" side). If the full support kids were spoiled, it happened long before they were sent to college. For most of the people I knew, having that full financial support just made their lives easier. They didn't drop out because they couldn't keep their grades up to keep the scolarships that didn't pay enough to live on (thus forcing them to take another job part-time). They had time to concentrate on getting great grades, doing research, working on unpaid resume builders. Thus, they got into better grad schools, and got better jobs out of school.
Do it. Save as much as you can. Aim to send them to the best school they can get in to, because it is worth it. I am thankful every day that my parents were able to do this for me, it has done nothing but good for my life.
posted by ch1x0r at 2:17 PM on June 30, 2006

You can go either way and end up with successful young adults or delinquents. There are reasonable arguments on both sides, and ultimately it's a personal choice for each parent — but the important distinction for this conversation is that there's a difference between buying your kid a school book and handing him $50 for [whatever]. Paying college tuition isn't quite the same as "giving $100,000 to an 18-year-old."
posted by cribcage at 2:25 PM on June 30, 2006

Talk to your kids about reasonable college expectations if you're not going to save for them.

My parents told me I could go to school anywhere I wanted and I shouldn't let anything hamper my dreams. So I got a first class $120,000 education -- and found that despite scholarships, grants and work-study, there was something hampering my dreams: debt.

While other kids were really pursuing their dreams, I had to make enough money to pay off my huge student loans every month. When I went to work, I had several hundred dollars less every month than colleagues without massive student loans.

I have a really hard time not resenting friends whose parents really could afford to send them wherever they wanted -- and who have thus had a lot more freedom to experiment.

I'm also jealous of friends whose parents forced them to take the financial realities into account when they applied for college. One got a full ride scholarship before deciding to go to an expensive private college. Others chose to go to much less expensive state schools.

Friends who graduated without huge debt didn't have to charge up credit cards when they set up their households -- they had more disposable income with every paycheck. They didn't have to buy clunker cars, because they could afford decent used cars outright or payments on new cars. And five years out of college, the friends I have who have built the most weath -- as homeowners -- are universally those who graduated without debt. I'm years behind.

If I'd had a clue about any of this before I went to college, I might have gone to a state school, or applied for more scholarships, or something, in order to avoid my current situation. But it's too late now.

Don't fund your kids college at the expense of your own retirement, however. That's just not worth it.
posted by croutonsupafreak at 2:29 PM on June 30, 2006

I've always found the argument that having kids is good because they'll look after when you're old to be weird and unconvincing, but if it's something you believe or are counting on, then you should probably pay for their education. Otherwise you're gonna have a very lean old age.
posted by occhiblu at 2:30 PM on June 30, 2006

When your kids go for college-level financial aid, if they do, money that's in their name is treated differently from money that's in yours. Their aid package will expect them to contribute a much higher proportion of their money than you do of yours. Maybe even all of it, with an expectation that they will be able to earn a similar amount and contribute it each year. So be very careful and consult someone knowledgeable (not me!) before you start a fund under their name.

Also, as far as I recall, any of your money that's in retirement accounts is not figured into how much you as a parent can afford to contribute.
posted by expialidocious at 2:48 PM on June 30, 2006

My suggestion is to start the college fund - you don't need to tell the kids that it exists, and you don't need to hand over all the cash as soon as they turn 18. A better approach is to have the money saved and available, and hand it out bit-by-bit, helping out the student as much as is needed given the situation.

Without a doubt, the student should have to pay for at least a portion of his or her education. It's hard to value something unless you have to pay for it out of your own pocket.
posted by gwenzel at 2:53 PM on June 30, 2006

Despite the fact that things were kind of lean for my family at that time, my parents paid most of my way during college (summer jobs paid the rest). While my character arguably could do with some more building, I definitely don't take that outlay for granted, and the fact that I was able to start my working life without debt allowed me to do some life-changing (and life-improving) things that otherwise would have been impossible. And I could have held down a part-time job during college, although I could not have done that and bike racing (which I did do) and kept up with homework.

I'll echo what the others have said: if you start putting away money now, your principal will be accruing a lot of interest (hopefully keeping pace with the inflation in tuition or better) over time. If your kids need to take on debt to go to college (which they will—minimum-wage jobs won't cut it), their debt will be accruing interest instead.

In terms of maximizing utility, if you can sock away a few bucks now, the total utility for your family will be much greater.
posted by adamrice at 2:57 PM on June 30, 2006

You should realize that colleges expect parents to be able to contribute a certain minimum amount [calculated based on your income, assets, taxes, etc.] If you don't contribute that amount, the college will not fill that gap with extra loans, grants, or scholarships. My father chose not to contribute any money to my college expenses. However, because he makes a fair amount of money, and because his income and assets are still considered in the calculations for the expected parental contribution, the school gave me relatively little financial aid. He also threatened to stop sending in the financial aid forms at all [meaning that the college would then give me no financial aid] if I took on more than a certain amount of debt. Between other family members, scholarships, and the fact that I worked throughout college, we were able to make things work, and I was able to go to the college that I wanted to go to. But again: I was lucky. Your kids might be lucky too - or they might not be.

I was also lucky because I was able to find a way to get paid for doing research as an undergraduate [which is very important if you're trying to go to grad school in the sciences.] My school had a very good program for that kind of stuff - but many schools expect students to do their research for credits or on a volunteer basis. If I'd had to choose between a job and research, financial considerations would have forced me to choose the job - but that would have hurt my academic future. That's a pretty bad position to be in. There's a certain point beyond which your goal of "teaching your kids about real life" could very easily turn into "hurting their academics and their future by forcing them to choose between working long hours on top of being a full-time student or taking on lots of loans."

You don't want to put your kids into that kind of a situation. College is much, much more expensive than it was when you went. Kids are coming out with a great deal more debt, and that can affect them for years and years after they graduate. Saving money for their college expenses is not like handing them $100k - the tuition bill [or part of it] would be going straight to you. Consider making them responsible for their living expenses but not their tuition, or some sort of other intermediate solution - that way they'll have to learn how to be responsible, but they won't have debt weighing them down for the next ten or fifteen years. If you start a fund now, you can always choose to change the amount of money you contribute. If you don't start one, you won't be able to change your mind and help out 18 years down the line.
posted by ubersturm at 3:16 PM on June 30, 2006

No college fund for me, and worse, no college-mindedness, meaning little or no guidance about how to get into or afford a decent school. Despite scholarships and aid, that meant community college, then state school, and ramen and holes in my shoes and that whole familiar story. I've watched people less able than me get incredible opportunities simply because of their school pedigree, and people more able than me miss out on a great deal because they never could make it work out at all. In addition, many of my loved ones and friends are absolutely crippled by debt when just starting out of school. Many of them come from families that never could have afforded a fund. Unlike wealthier kids, a bad semester or serious illness or some other setback did not just impede their progress -- in too many cases, it stopped it cold. Financing higher education in America is brutal and there's no way it's getting better.

One relative did save some money for me -- my grandfather. He put away a suprising amount by the time I was ready to go to school, on a trashman's salary, because he loved me and wanted me to have a better life than he or my mother had. Without it I would have struggled even more ferociously. My father, who wasn't around much when I was growing up, could have put far more away out of his comfortable living but did not.

For this and other reasons, I think of my grandfather as my father, the person who loved me enough to make a true sacrifice for me and who had faith in my future even when I was a very young child. That sum of money, but no less the faith and love it represented, got me through a very rough time. If you can afford to give that same gift to your children, you should.
posted by melissa may at 3:34 PM on June 30, 2006

I got through college on a mix of loans, good internships, and family support. It was certainly character-building, but I have > $20k in student loan debt to show for it.

You really, really, really should look in to setting up a 529 plan. Should you decide to contribute to your children's education in the future, you'll save 25%+ on those contributions, and if you don't, you're not out anything.

Understand that the inflation-adjusted cost of higher education is rapidly increasing at the same time as the need for a college degree in the workplace. Many college grads these days have a huge amount of debt that prevents them from properly saving for retirement, establishing good credit, or buying a house. Bankruptcy also builds a lot of character, but I wouldn't encourage it.

I second the above comments about not forgoing investment in your own retirement. The message I would send is that you should be constantly looking for ways to avoid taxation (would you rather work for 50k / year or 37k / year?), and contributing to your kids' college educations - which I seriously think you'll have to do either way - is a great way to do this.
posted by 0xFCAF at 3:35 PM on June 30, 2006

After careful consideration over the past 16 years, I've come to the following conclusion: working my way through college built character in ways I still have not fully apprehended, but I would never voluntarily do it again.

It sucked. I worked 40 hours a week while I was in school, and 80 hours a week when I wasn't, because I wasn't that good a student and didn't qualify for scholarships. As I was at a pricey private school (a damn good one), I worked my ass off during the summer to pay for as much as I could so I had to borrow minimally.

As a consequence, I literally took no time off for the entire time I was in college, with the exception of brief periods around the holidays. In fact, I take more time off per year now, when I take a maximum of three weeks aggregate per year, than I ever did in college.

I do not want that for my child. I want him to have the life my classmates did, traveling to Europe, traveling around the world, and getting to do what they wanted instead of what they had to do.

What I find most bitterly ironic is that I spent almost four full years in school between 1990 and 1994, taking on something like $45,000 in debt, and then dropped out in the second semester of my senior year because it was either drop out or have a nervous breakdown. The stress was that intense.

scody's words might as well be mine: my debt load has caused me (and my family) a truly disproportionate amount of stress over the years. I refuse, categorically, to subject my son to that kind of albatross. God willing and the creek don't rise, he'll take after his mother and get scholarships and go to a truly amazing school and come out debt-free. But we're already saving in case he doesn't. If he gets scholarships, then he'll have a surprise "travel the world" fund waiting for him.
posted by scrump at 3:56 PM on June 30, 2006 [1 favorite]

oh my god, croutonsupafreak is my long-lost sister -- this was my experience down to the letter. My own sister and I were pushed from the word go to get the best educations we could possibly get, cost be damned -- based on the assumption that our diplomas from those great private schools would immediately translate into lucrative, high-paying jobs. Oh, how we laughed cried when we got the joke!
posted by scody at 4:17 PM on June 30, 2006

My family was not in a position to give me more than gas money in college. Luckily, I qualified for a merit-based scholarship. That plus a couple part time jobs and a pell grant meant I managed to get through with less than $5K in college loans. Nevertheless, on an effectively entry-level wage, the loan payments were very noticable in the budget. There's a lot to be said for having at least a part time job in college; it puts a young person in touch with real people who work hard to get by, to say nothing of minimizing loan repayment later!

So yeah. Help your kids -- the financial aid people expect that you will! -- but don't do everything for them. And for goodness sake don't put it in their name, or when they attain majority they will legally be able to do anything they want with it! Like buy a fast car, or go on a drinking tour of the world maybe. Also, funds in the kid's name are assumed to be all for college, whereas funds in your name are assumed to be at least partly for your retirement.

As your kids get old enough to consider college choices, remind them that college is a means to an end, not an end in itself. It's one thing to take a minor in an obscure but beloved subject, it's another thing to major in it. If they gotta have the art degree, insist on something practical in a minor, like business, education, or a foriegn language.
posted by ilsa at 4:21 PM on June 30, 2006

Debt after college is a crushing burden, and there is nothing noble about having it or having to try to figure out how to pay it. scrump really nails it in a certain sense.

The thing is that your kids can't feel entitled. They need to work for the rewards they receive. For example, when I was in highschool, I didn't have to work so long as my grades were good (ie, as long as I was trying rather than screwing around). But if they'd gone downhill, believe me, a job would have been on the horizon. College was handled much the same way in my family -- my parents figured they were paying x so much of an amount toward it, and they could either help me maximize that investment, or make it as hard as possible for me to do so. I wasn't rolling in spending money like some people, but I never went hungry. And I was never afraid that I would. That's a huge asset. It makes things so much easier. In comparison to some of my friends I am nearly 100% debt free except for our house, which we bought when I was at the ripe old age of 23. Only one other friend with whom I went to college who came from a similar background has been able to buy a house. It's not a huge sample, but nearly every one I know is trying to find any way at all to scratch and claw their way out from under debt . . .it's not pretty. They're wasting their lives on worry and Ramen noodles. I wouldn't want any kids I might ever have going through that.
posted by Medieval Maven at 4:25 PM on June 30, 2006

I got through college on financial aid and scholarships, with my parents picking up some of the living expenses throughout the way. I think as long as you're not forcing your kid to live off of ramen to teach them the value of a dollar, it's a good lesson to for them. By encouraging to find their own funds (part time job or internship) instead of relying on you, they will be taking baby steps into adulthood and learning how to manage their life.

I have friends who are 24-25 with parents still footing the entire bill for undergraduate degrees because the child has changed their mind, taken on too many classes and gotten stressed, etc., and have never worked at all. That's not character-building. As long as you are a support and safety net and not just a checkbook, I think a modest fund with strong encouragement to learn and manage their finances is decent parenting to your children.
posted by lychee at 4:29 PM on June 30, 2006

I think the approach my parents took worked out very well for me, my sister, and my parents, too.

My parents made it known that they would pay for four years of tuition at any state college or university, or contribute the max in-state tuition amount toward the tuition at any out-of-state school we might choose to attend. We offspring were responsible for all costs related to housing, books, food, beer, etc.

The tuition money was to be paid to us regardless of scholarships or other assistance. The effect of that was to preserve our motivation to pursue scholarships, grants, etc. I pulled in some scholarships and my sister went ROTC.

The effect of the four year limit was to motivate us to be serious about our studies and not make it an interminable exercise.

Another thing my parents did was to consistently divert the majority of monetary gifts to us kids from relatives (birthday and Christmas cards, etc.) into "college money" accounts in our names (joint parent/child accounts, I think). This provided a welcome cushion and allowed me to graduate college free of debt while only needing to work summers. I was no great fan of the gift-money policy as a kid, but I was sure glad for it as a college student.

My home state (Virginia) has several strong state colleges and universities, so I never considered it any hardship to get my schooling through those institutions. Your situation may vary.
posted by NortonDC at 4:32 PM on June 30, 2006

At this point, I think it's more character building and teaches children about 'real-life' more to have to do it themselves.

Well, maybe one thing it's not so easy for you to see now is that when they are in college, they will not be children any more. If you haven't formed their character in the way you want it (something I wonder if parents ever exactly accomplish) by the time they go off to college, nothing you do after that will. And they will also 'learn about real-life' sooner or later no matter what you do, and quite possibly do it without you to blame. It really isn't clear to me that a pedagogical motive for not paying for your kids' college educations is a very sound one.

Not to be blunt, but are you sure this isn't the (very human) but perhaps not entirely rational idea of "if I had to do it the hard way, so should other people"?
posted by advil at 4:41 PM on June 30, 2006

My kids' inheritance is their education. I will pay for it (tuition, books and essentials including room and board to an extent) then they will get nothing when I croak. I cannot think of a better thing to leave my kids with than an education and the schooling to be able to make their own way in the world.
posted by JohnnyGunn at 4:55 PM on June 30, 2006

Likely college will cost a lot more for your kids than it did for you, and that's not just inflation.

My parents agreed to pay for my college, with my understanding that if I wanted to go to graduate school, I'd be footing the bill. It was incredibly generous of them, and I'm so completely thankful that they were wise enough to start saving early. I'll only be in 100k debt after I graduate, whereas my classmates that had to pay for both undergrad and grad will easily be seeing 150-200k debt. Woo.
posted by gramcracker at 5:26 PM on June 30, 2006

My college experience is night-and-day different from my wife's. Neither of us went to super-high-cost colleges, but...

* She had it all paid by the parents; I had nothing, getting by with a full-time job

* Because she had no job, she graduated in 3.5 years. I graduated in six.

* She constantly took a full load of course. I had to get by with whatever worked in and among my job schedule. There were many semesters where I had to go half-time, because I just couldn't handle anything else.

* Her coursework was of a higher quality, because she could afford to take more difficult classes and spend the time required for them. I attemped (and largely succeeded) to skate through everything with minimum effort, because it was all I could do.

* She had time to work with professors on research studies. I had no time for anything outside of my core focus.

* She lived in a dorm and had the full "college" experience. I lived at home and later with roommates and commuted everywhere, spending probably 25 percent of all time committed to college just listening to music in a car.

* In the end, we both got similar diplomas. But her's was two years earlier than mine, of a higher quality, and she had a far more memorable experience. My college years are a blur of service jobs, a lot of bullshit classes, and a lot of wasted time.
posted by frogan at 5:30 PM on June 30, 2006

I have a friend whose parents were moderately wealthy (foreign cars, expensive house, live in a general lower upper-class lifestyle, not Paris Hilton but not to where money was ever really an issue). He was smart but forced to go to a local conservative private college where everyone was geared towards graduating and settling down, no intellectual stimulation whatsoever. The better classes were not available to him as he had to work around his job. He had to live at home which kept him from getting laid and severly curtailed his social life (I would imagine living 30 minutes away and with your parents would be a confidence drain if nothing else). He could not qualify for financial aid. He also seemed to do quite a bit of drugs and alcohol to deal with the stress of full-time school and a full-time job.

This in and of itself is not inherently bad in my opinion. The problem lies that in reality most kids going to college are not in this situation and receive some sort of support. Poverty sucks, but poverty relative to peers sucks more. I think the above examples illustrate how a great experience can be killed by lack of money in the name of "character building."
posted by geoff. at 6:18 PM on June 30, 2006

You could invest the money in a Roth IRA and then withdraw what you put in (ie, not the earnings) for college. Withdrawls for qualified education expenses have the early withdrawl penalty waived. This keeps your options open - colleges don't count the Roth savings against your kid when figuring financial aid eligability. But you really have to run the numbers and see if this works for your particular situation. If you're only planning to foot part of the bill it might make sense.

An article on this option here .

For what it's worth my parents abruptly stopped helping me with college after the first year (and were jerks about it) - as a result I am way better with money than most of my peers. I'm still bitter about what went down with my family, but it's about lack of communication rather than lack of money.

I don't plan to encourage my kids to "follow their dreams" irrespective of cost - being able to plot a practical course to your dream is a valuable skill. We'll certainly help out monetarily but I really think the main thing I'll be able to offer at college time is education about how to manage whatever amount of money they have to work with.
posted by selfmedicating at 6:54 PM on June 30, 2006

If your goals are to give the kids the best shot in life, I think it is the best way, and it's going to be a lot more than 100K apiece. YMMV.
posted by ikkyu2 at 7:36 PM on June 30, 2006

way too much to read here so sorry if i am redundant. fully fund your retirment accounts first, you can aloways borrow against them to pay for schooling, and it avoids the issue of having too much saved to qualify for aid. if you really want to set your kids up, save the money to put down on a house for them, in which they can rent out rooms to cover the rest of the mortgage and maybe make a little spending money, and have them take out loans for school. id rather my kids have to pay off a student loan than a mortgage....
posted by fumbducker at 8:59 PM on June 30, 2006

I'm in college now, paying my own way... mostly. I go to a good public school, and in my state (Georgia), the state's lottery proceeds pay for tuition and fees for most everybody. I made the most out of high school and got a few solid scholarships that covered room and board on campus my first two years, with a little left for spending; next year I'll be in an apartment and off the meal plan, but I expect the situation to be similar. I work full-time over the summer, interning at a law firm, to make spending money -- but I like my job and it's helped cement my career choice.

My parents give me money on the occasion that I need it, or just when they feel generous, but other than pay car insurance, they foot little of my bill.

I grew up middle class, so my parents didn't really save for college. My grandparents did, though, so there was a good bit there when it was time for me. Since I had a good handle on college expenses, and since my car was on its last legs, we used the savings to buy me a new car. While it hasn't financed my education, having the college fund was a good motivator for me to do it myself so I could spend the money on something else I wanted/needed, while at the same time letting me feel good about myself for earning my way through school rather than being just another "rich get richer" story. (Though odds are, my parents will be paying for law school. Given they've spent nothing on undergrad, it seems fair to all parties.)

However, while I'm proud of what I'm doing, I can't imagine not having scholarships. One of my good friends is a waitress, and has to put her social life on the back burner (and extracurriculars behind that) to put her way through the same school as me. Hers is not the life I'd want to live, or have my kids live, and that's even considering that she'll have little or no debt when she gets out. (FWIW, I find it hard to believe shelling out $30K-plus per year is really worth it in the long run, when that could pay for SIX years at the major state university I attend. The positions held by alumni of my school seem to bear that out.)

My advice, and what I hope to do for my kids, is to sock what you can away -- you've gotten lots of advice on how to do that -- but encourage them to get enough from other sources that you can use it on grad school, travel, a house or a car. And by all means, encourage them to work over the summer, if at all feasible, to help themselves out, too. Daddy shouldn't have to pay for everything, so don't even make that option available. It's a good compromise between teaching how the real world works and throwing them to the sharks on their first dive.
posted by SuperNova at 11:16 PM on June 30, 2006

I grew up believing (and being assured by my parents) that my education would be paid for. My senior year of high school my father lost his job and we scrambled to make ends meet, as we live way beyond our means (we're middle-class in an upper-middle class neighborhood, and at the time had a car payment and 2 mortgages). Facing uncertainties, and being an emotionally-immature 17 year-old when I graduated from high school, I was willing to go the community college route despite a 3.6 GPA with honors/AP classes and varsity letters and a resume loaded with volunteer work. My parents said "No, you're going to university; please sign this paperwork along with your application." I graduated in 3 years from a decent state university, taking anywhere from 16-20 credit hours a semester, working 30+ hours a week, living at home, and commuting from home/work to school. And I graduated with a 3.3 overall and a 3.8 in my major. Unfortunately, I drank away all the money that I made, but that's another story. 2 years later, I work in retail, live at home (because I can't afford 3x market rent in my area), have 11.5k in debt at a 5% apr, and recently went on my first vacation since 2001. But I'm sober. And I have a car that's paid off. And those loan payments make a dent in the $1200 I earn every month. And I resent the hell out of a) going to university in the first place; when I clearly wasn't ready, and b) my peers who have attended private universities and had their parents foot the bill for their education and now help them with living expenses. Not that they're spoiled; I'm simply very envious of their situation. All of this has left no doubt in my mind that I will be paying for my child(ren)'s education. I want them to have opportunities that I didn't have; and I don't want them to see me as a selfish jerk.
posted by sara is disenchanted at 9:39 AM on July 1, 2006

You've gotten lots of good answers, but just for one additional datapoint:

My parents fully funded my education (college and a masters degree.) They also helped out with my living expenses while I was in school so that I could study full time without having to work. However, they never spoiled me--they made it clear that working hard in school was my full-time job, and they acted as my tough-but-fair bosses in that job. They also wouldn't fund living expenses they considered unnecessary or extravagant. (I actually ended up choosing to get a part time job at times during school in order to pay for luxuries like a tuxedo for a formal dance at the school.)

While I chose a college, my parents' financial support meant I could go to the best school for me, without having to worry about how I would pay for it.

While I was in school, it meant I could take full advantage of my classes and of the school's extracurricular life. The extracurriculars I chose (theater and improv comedy) ended up being more useful to my future career as a writer than many of my classes.

When I graduated school, I had no debts, which meant that I could take low-paying entry-level jobs in the field of my dreams, rather than having to take higher-paying jobs that didn't interest me. Those entry-level jobs turned into real jobs, and I'm now a full-time writer, which is what I wanted to be since I was a kid.

In short, I'm hugely grateful to my parents for paying for my education.

I'm even more grateful to them for believing in me, for being fantastic role models of hard work and honesty, for teaching me that fancy cars or expensive clothes have nothing to do with your worth as a person, and for pushing me to work hard in school. If you do those things for your own children, then trust me--by the time they get to college, their character will already have been formed.
posted by yankeefog at 12:23 AM on July 6, 2006

My mom paid for college and grad school for me and I am so grateful. I am NEVER EVER going to go to a private college ever again. When confronted with trying to figure out how to pay for further education, I am definitely going to go with the cheapest available. I would be so depressed if I had had to pay off those horrible loans myself. I thought for a while that I had to and I have never felt so depressed as when I was facing down a mere $18.5 K in loans, you know? That's nothing compared to what my classmates are trying to pay off.

I am so lucky and so grateful that she felt like helping me, even if she didn't think I was worth it. I would have been doomed otherwise.
posted by onepapertiger at 3:05 PM on July 6, 2006

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