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Small amounts to ESA and apple stock

December 24th, 2023 at 06:11 am

The year is ending and I just thought I'd post about college savings and how small savings adds up.  Maybe to inspire someone, maybe because it's the simplest accounts we have.  My DK1 turns 14 in January.  I think we started her Education Savings Account or Coverdell in May 2010.  But Coverdell IRA or ESA are capped at $2000 a year contribution limits.  But you can invest in anything.  What have we invested in?  VOO.   Yep that's it. BORING.  Nothing special.  DK2 was born in July 2012 and I think I did her as well maybe a few months later.  So I've been tracking it for awhile. I have to go back to see how it was but 10 years ago...Realize we've never contributed more than $2k/year.

1/1/2014   DK1 $11,239   DK2 $6369

1/1/2015           $12,251           $6831

1/1/2016           $14695            $9105

1/1/2017           $16,588            $10,277

1/1/2018           $22,205           $14,612

1/1/2019           $24,801            $17,605

1/1/2020           $36,702           $27,169

1/1/2021           $39,668          $29,251

1/1/2022            $51,869          $38,691

1/1/2023          $43,940            $33,366

12/1/2023       $54,540             $41,945

total contri      $26,000            $22,000

So small amounts invested once a year for many, many years leaves to a doubling in 12 years.  It's supposed to double every 7 years but i'll take it.

As for apple stock?  DK1 sometime in 2010, again I think summer 2010, we were visiting in SF and DH's uncle.  He decided after meeting DK1 he would gift her 2 shares of apple stock and asked us to never sell it.  At the time it was $300 a share so he gave her around $600.  We didn't reinvest the dividends though we should have. I think we let the cash ride.  What's the $600 gift worth now from July 2010?  $11,891.  She has 60 shares from all the splits, but since I started reinvesting dividends actually 61.425 shares. DH's uncle didn't give DK2 but I did matching shares for her in a taxable account.  Those two shares of apple are the only reason why we had taxable accounts for the kids since we didn't plan on having enough money past the $2k/year ESA.  

Well now the kids have around $45k each in a taxable account and they have nice and hefty college funds with the ESA being a big chunk of it.  Turns out small investing can make a big difference in someone's life. We weren't born into any sort of money or inheritance.  But wow, just a tiny amount can make a huge difference. 

Imagine if either of our parents had gifted us even $500 or $1000 per year per kid for college or anything else.  I'm hoping to do that for our kids. Maybe be in the situation where we could gift the maximum per year to them.  Investing in their taxable accounts might make a bigger difference by the time they are 30.

College is what you make of it

September 16th, 2021 at 12:21 am

My cousin's daughter is in her 2nd year at college.  She is going for free at a cal state college and living at home.  She had a 2 year tuition free scholarship.  Amazing.  So she's going to have 2 years of university for free and then transfer to a different UC or Cal-State and finish up.  So amazing.   She plans on being an elementary school teacher which as people know is not the best paying job but an essential one.  Since it's not high paying it's pretty amazing she's able to do it with minimal output.  This will mean she'll be further ahead when she gets out!

On the flip side I have a client paying for UC Davis $70k year out of state tuition.  I'm not sure what his kid is doing in their 2nd year as well. He has another child about to go and he's again estimating $70k, so he'll be shelling out $140k in tuition and living expenses a year.  

You can see how on both sides of the coin college can be as cheap or expensive as you choose to make it.  What will I do? I don't know.  But I'd like to believe that I'm being flexible.  I am on track to have 4 years saved at an in state college tuition/living expenses.  I am on track for about 2 years at a private/out of state school.  And I've saved both in ESA, 529, and taxable so there is a ton of flexibility on what the girls might choose to do.  I will admit seeing the $70k price tag gave me a bit of sticker shock and fear over what it might cost me.  If my kids went that route $300k seems a bit insurmountable.  We don't have the time now with 11 and 9 to save that much nor will we get there with what we saved.

rethinking college costs

February 6th, 2018 at 07:26 pm

So I've been rethinking college costs as I investigate into 529 more. I think I'm going to pass on it for now.

I really have been considering putting more than our $2k/year away for the DK. But since FASFA considers children's accounts more heavily than parents it might make more sense to keep the money in our accounts and use it for that purpose than to ear mark it now.

I see a lot of parents paying out of pocket for college. I know the timing usually works since you are usually making more by the time your kids are 18 than when they are 2. But I wonder if this is the tack to take? I guess there is so much uncertainty about what college will costs. How hard it will be to get in and go? How do you really plan?

That being said we did fund 2017 and 2018 ESA with $2k/year. So my DK 8 in 2nd grade has about $27k and my Dk 5 in kindergarten has $19k. I think it's something. They both lost a lot this week since they are both in VTI only. But at least we are taking the risk.

Assuming college will be $100k if we can manage to save $50k by 18 for both I think $50k over 4 years will be $12k and we could afford to cash flow that.

$2k rule for college savings

June 1st, 2017 at 05:41 am

There was an article I read recently that saving $2000/year per year your child is will allow you save half the cost of a public university cost in state.

Text is $2k rule and Link is
$2k rule

The article says if you save $2000/year for a child that you will have $36k after 18 years. Pretty obvious statement. The article says most people don't save for college because they have no guidelines and think it unachievable. But if people followed this guideline it would seem more reasonable goal.

I figure anything you save like retirement will help. I just checked and DK1 has $19,976 and is 7 years old. We haven't contributed this year so we've contributed $12k. And DK2 is 4 and we haven't contributed this year so $8k contributions but has $13,024. Granted the markets have been good to the kids. But I'm just investing in VTI and being boring.

I will contribute after we buy the house each another $2k this year. I'm thinking maybe by 18 each kid could have $50k? Definitely about 50% of the cost of public school tuition. Also assuming we don't save any more.

I'll keep everyone posted as we go along. Since we really did start when they were born and are saving $2k into a ESA it'll be a good litmus.

college savings

April 6th, 2017 at 04:02 pm

We just contributed our $2k to our kiddos college fund a bit late for 2016. We're still in flux trying to buy a house but decided to go ahead and do it. We're invested for both of them in VTI and that's it. I guess in about 10 years we'll consider moving them to something more conservative but I figure at 4 and 7 we're better off taking the risk since the goal is to not draw on it for anther 11 and 13-14 years.

So I hadn't realized but DK1 has $19,398 and DK2 has $12,778. It's pretty good I think. Continuing on this track we should definitely have $50k by the time they hit college each. Stretch goal? $100k which I hope by that point will cover 4 years at a state school which is our goal as parents to give to them as a gift.

Now doing taxes I see a lot of people saving nothing for retirement. Saving nothing for college. But stressing out about how will they pay for college. I hate to say it but I suggest they instead focus on maxing out a 401k and IRA before worrying about college. And inevitably the words come out "but I have to pay for college. How else will they go? They need to go."

I don't know what to say. Since most are white collar professionals I would have to say not going to is not an option and I understand. It's not an option for my DH. And truthfully these people make more than enough money that college shouldn't have been a problem. But neither should saving for retirement.

But instead they are in their 40s/50s and basically bupkis for retirement or college. I have to say something has to give. And using their free cash flow for $100k towards college seems like a bad idea.

I'm not sure how we change this as society? I mean the obvious is to educate people about saving for retirement earlier. Saving for college earlier. Have less debt.

But what about this feeling that we have to pay for college? That we owe our kids a college education? We have to help them? Are we obligated? Is there an income obligation? If you make over $100k then you should be helping your kids because you make enough that you should have been able to save for retirement and college?

I'm not at that stage but seeing this make me wonder. Yes DH and I are being responsible but we're being overall responsible like others on this site and saving for retirement and college is secondary. Right now as it stands I think we are pretty close to having enough in taxable accounts that we could fund college now. But we aren't quite ready to commit to "earmarking" and putting that much into a 529.

But are we supposed to? Should we feel obligated? That we do well enough that we can afford to save for retirement early so instead we should focus on college? That we should delay ER for fully funding college 100%? I always have said our goal is FIRE and looking at our numbers we are there.

But DH is not about to give up his new career anytime soon he loves it. I love working part-time. I can't see myself volunteering and I love getting out of the house. So right now it's not on our radar. We have a slower pace of life since I stay at home for the most part and are more relaxed than most of our contemporaries. So we can fund college more but are we obligated too?

Lifestyle choices

June 29th, 2016 at 03:04 pm

We're in the midst of another road trip so we've been chatting a lot in the car. I'll post pictures if I can figure out how of cool stuff we see.

We're doing our due diligence and starting to focus on areas we'd like to live permanently. Right now DH works around 20 miles from work he'd like to cut it down to 10 miles. I'm all for him having a shorter commute that's in line with our values and lifestyle choices.

But he brought up potentially moving out of the suburbs and moving into the city. He would be within 3-5 miles of work, bikable/fast transit, one car family, convenience/urban and fun. Trade offs are smaller home, not a big deal, postage yard (big deal to me), lack of privacy, and not great schools potentially. So he suggests maybe private school instead for the kids? Something we've never really considered both being products of public schools.

So now I'm torn. Do we shorten his commute considerably and change our lifestyle drastically? Is it in line to be really close to work, 1 car, no yard, I don't mind a small house but hate having neighbors right there, and private school? Is this a lifestyle I want or does he? We're really struggling because this would be permanent.

I know it'd be cost efficient probably to buy a house in the city for less money potentially in a bad school district and do private school. We'd save on time and costs. But I'm really not sure I'd enjoy it.

I have been a huge proponent of living where you love. That people in HCOLA who shouldnt' live there or LCOLA not making much should live where they love. And now we're at that same point.

DH could love the commute and he likes walking to places. But at the same time we aren't sure about living so close to neighbors and doing private school. What happens if he loses his job? While other jobs are in the area and he'll likely find one in the same area we'll be on the hook for private school tuition no matter what. But many people pay for private school even in good school districts for different reasons. Would we consider private school anyway in the suburbs? We have neighbors and friends doing private school now.

I think I'm feeling more pressure because before we always felt we had flexibility and time to make a mistake and correct it. But now the kids are getting older and more settled and I don't want to keep on moving. This is just difficult because it really is a lifestyle decision.

More talking to commence. FWIW we've been looking at houses in the city and they are fine. The parks are cute and walkability is amazing.

Do you like where you live? Do you wish you lived in the city or suburbs or more rural? And do you do private school and why did you choose it?

Is a college degree worth it?

April 6th, 2016 at 08:23 pm

Here's the truth, some people are better at making "returns" on their college degree than others. The truth is that for many career tracks you need a college degree. It's very difficult in the US to go to graduate or professional schools without a bachelor's and even joint 6 year pharmacy programs are starting to give away bachelor's as well. But medical, dental, law, business, and most phd programs won't take you without a bachelor's. It's the way it is in the states (please correct me if i'm wrong).

Second there are many career tracks that a bachelors is absolutely necessary, but the pay is terrible like being a teacher, social worker, public health worker. Jobs that people might love but don't necessarily pay well. I think that perhaps people who choose careers that a degree is absolutely necessary should get paid more but they aren't. So perhaps the answer is loan forgiveness and it should be "highlighted and encouraged" for those who choose low paying careers with lots of debt. Another option is pushing for those who choose such careers to maybe go to a community college then transfer to a four year institution to save money. I certainly would support either of my kids if they wanted to be a teacher or social worker but I'd tell them to do it as cheap as possible. I have A LOT of teachers in my family and my mom was a social worker. They would be the first to tell you the pay sucks but they loved their jobs. They would also agree it makes sense to do it as cheaply as possible.

Third there is the argument to be made that any degree will get you into the door of a corporate job. Even if the first job is being a bank teller, cashier, barista, or administrative assistant. That degree gives you an opportunity to move up.

My relative started at a costco punching a register with a college degree. She soon moved into corporate and started to "climb" the ladder till she quit to stay at home with the kids. Most of the people she knew started with college degrees in the warehouse then got promoted internally. It was rare to find someone just jumping into corporate without knowing the ins and outs of the company.

Second relative went into broadcasting. She did a degree in communications and started as an administrative assistant. Eventually she got to start writing her own new clips and filming. Then she got another promotion into directing or managing the 10 pm news. It all took paying her dues and working her way up. Many people do it.

I have friends who started as bank tellers at wells fargo, bank of america, and chase with college degrees and then worked their way into corporate. They are doing analyst, teaching tellers, etc. The entry level job was a stepping stone and the degree allowed them to move into something else.

I don't think that only "some" degrees valuable. I think that it's what you use it for and the purpose. I had a roommate who wanted to be a teacher and did. Her pay still sucks teaching 3rd grade, but she has been doing it now for ~15 years. She had lunch (on facebook) with a student from her 1st year of teaching who is a teacher now!!! OMG. She has inspired at least 3 previous students to become teachers themselves. I think her contributions are amazing. And imagine if someone had said "well teaching pays crap, you shouldn't do it." Where we would be today?

Did having a college degree help? Do you think it's needed today? Is it useless? Or is it still useful but tremendously expensive?

bootcamp so far

March 2nd, 2016 at 11:56 pm

A bit of a weary post. I have to say the bootcamp is a lot harder than my DH thought. He's greatly enjoying it, but at the same time it's a lot of work. He can easily see how working while doing this sort of studying can't happen. It is very expensive he realized that he's paying about $200/day to learn these skills so he's trying maximize the benefit.

I told him anyone doing this with him is probably there making huge sacrifices as well. Most have at least quit a job. Others have relocated to the area for the bootcamp but plan on moving back home. So they are renting apartments, bunking with family or friends, airbnb/VRBO. A couple of people with kids have had their parents move in with them. So of course everyone there is being very studious and taking advantage of every networking event and opportunity to learn from conferences. He's surprised by how seriously people are taking this course.

I hope he realizes how much effort I'm putting in as well. I get it now, I didn't get it before. That women who said they stayed at home to "support" their husbands. Previously when DH was working I "worked" like a paid childcare nanny watching the kids. But when he got home he'd help at least do the dishes, watch the kids, bathe them, and weekends have family time. Right now I'm doing it all from morning till night 7 days a week no weekends off. I never felt like I was doing everything, I felt like we each did our "jobs" then after hours we could split chores. Now I do all the dishes, laundry, kids, cleaning, etc. Weekends I take the kids out or he leaves to study and still make lunches, dinners, etc. I am with them from morning till night no breaks.

Four weeks in and I will say I am counting the weeks until my mom comes to visit in April for a bit of a break. I'm also a bit lonely with my DH sometimes working till past midnight at home but going to bed without time to connect. And just in general working later and missing dinner with me and the kids. Granted I'm busy with kids, sick dog, and just stuff around the house, but it is nice to talk to another adult. I'm just counting down the weeks. 8 more weeks and 6 more weeks till my mom visits.

Does this mean that we shouldn't make education free? Because paying for it makes one responsible? Not necessarily because I think it's still up to the parents to explain to any child the true cost of college. Because even if an 18 year old is paying 100% for college out of pocket, they may not truly be responsible enough to comprehend the consequences of borrowing $100k to go.

I mean I've meet people who graduated summa cum laude with $100k in debt and took school seriously. But when they started at a private university and got a degree in communications or teaching they didn't expect to make what they were making after going to a private university and working so hard. They weren't out partying or flunking out. It just happened what they picked didn't end up paying well.

But are we supposed to only go to college for degrees that pay? If so then we'll likely never have another k-12 teacher again, or social worker, or therapist, or any other non-profit skilled job. There are many careers where people don't make much money but still go to college for it. I'm not sure how to balance that paying for college.

Full day kindergarten

November 17th, 2015 at 06:39 pm

So we got a call that DK1 whose currently in half day kindergarten got offered a spot in full day kindergarten. The cost is $370/month. A great deal honestly. But the negative is that DK1 would have to switch classrooms. When we moved we were hoping to get into full day kindergarten. Because we thought it was more educational. Yes and no. The curriculum is similar but more time is spent on each subject. 1 hour versus 30 minutes on writing, reading, math, art, social studies, etc. So why the hesitation?

I think because it's December and I worry with all the change she'll be sad. I don't think she's made super close friends yet, but she has made friends. Talking with DK1 she's very interested in going full day because sitting with mom and dad for lunch gets boring. Sitting at home doing homework daily with us (workbooks, piano, math) is tedious. If I had to guess I think she gets more attention and is learning more at home with us than at school. But because of all personalities involved DK1 isn't keen on us teaching her. We do a lot of nature and science teaching as well as workbooks and online coursework. We've done IXL, abc mouse, khan academy, and she takes russian math. Along with piano, swim lessons, gymnastics we know she's getting a nice supplemental education. But I can see how it could be fun to stay at school. But i wonder if she'll be happy having a new classroom?

We have until tomorrow to decide. I am leaning towards full day but perhaps it's too much of a change. Did your kids go to school full or half day kindergarten and why?

College savings

October 30th, 2015 at 05:11 pm

So we're on track for retirement and being financially independent. However I know my DH and I have taken care of ourselves at the expense of our children. We aren't going to be eating cat food and we are going to provide them with a good life and education k-12. We are going to give them a nice place to live, healthy food, and an education.

But what about college? That's the elephant in the room. I love reading CreditCardFree's posts about college. It is costing $17k/semester for her daughter to go to a state school. That means it is $136k without scholarships to go to the state school. OMG. And I understand it's out of state tuition but she explained the scholarship brings it in line with in state tuition which still isn't cheap!

But they are paying $7100 this semester because of a $10k scholarship and with the scholarship it works out to $75k for 4 years. Another reader Joe said he paid out of pocket after scholarships $9k for the semester which works out to $72k for 4 years. Jolie says they are paying $13k for the year or semester I can't tell. Either way it works out to $52k for 4 years or $104k for 4 years. Ms Frugalista said it cost $40k and probably $47k in total for each of her two kids now.

So I'm going to estimate right now in 2015 $70k is not an outrageous amount to be paying for college for 4 years. That works out to be around $17k/year. Assuming a very conservative 3% inflation rate I'll need $100k in 12 years. Granted I have an extra 4 years to pay this over and I have 15 years for my younger kid.

$100k for each kid as a ballpark number seems like a reasonable amount. I have 16 years for one and 19 years for the other because I will likely borrow and pay back based on grades. I want my kids to have skin in the game.

But we've only save $14k for DK1 and $9k for DK2 at a rate of $2k/year. According to a calculator if we save $2k/year for 16 years and get a rate of 6% return we will have $88k for DK1. So we may make it depending on the market. However if we save $300/month for 16 years at 6% we can have $130k. For our younger DK2 we have $9k and if we save $2k/year we'll have after 19 more years $96k @ 6% rate of return. However if we save $300/month for 19 years @ 5% we'll have $152k.

Can we find $300/month more for college? I think we can. After we buy a house and determine our living expense I'll show DH our potential college savings deficit and determine if we think $100k is enough for each child.

I've always said I'd like to provide 4 years at the state school and anything above we can't guarantee. Of course if they go somewhere really cheap I'd also love to give them the balance for graduate school!