Starting Early and Saving Often
I'm In Debt
- Posted:
11/29/2008
I have never fully understood how the financial markets work - stocks, bonds, mutual funds - they're all a bit of a mystery to me. What I do understand is the power of compounding interest, and the fact that if you start saving money at a younger age you'll end up with more money by the time you're ready to retire than if you wait until you're older. That makes sense.
Using that basic knowledge, I determined that if I started my children with some sort of savings now, and contribute to it as often as I can, they'll be better off financially when they're adults than if we waited until they were teenagers starting their first jobs.
Did you know 529 plans allow you to open them with a small amount? The 529 education plans are state-run, so the actual amounts may vary depending on the state you live in, but I opened NY 529 direct plans with $25 each at
savingforcollege.com. Once I set the accounts up and chose the investment strategy, I decided to auto-deposit money each month from my
checking account. This means I don't have to remember to contribute to their fund, as I set it up to occur once a month, automatically. I also connected my
Upromise account, the rewards program that gives back a percentage of money I spend on groceries and other items at no additional cost to me; and set up a registry at
FreshmanFund.com. FreshmanFund is a gift registry that allows friends and family to make contributions to the child's registry - and then the contributions can be transferred to their 529 accounts.
Setting up the 529 accounts for each of my children, connecting to Upromise and setting up the registry on FreshmanFund.com to connect to the 529 plans took me a total of 40 minutes and cost me $50 (I started each account with $25). If you're looking to help your children start early and save often, I highly recommend spending 40 minutes to set yourself up!
I'm torn on the value of higher education. Don't get me wrong, I'm happy I went to college for many reasons, but I think in most cases on-the-job experience is far more valuable than a piece of paper that says you graduated college. I tend to think that unless you are going to college for something extremely specific - like becoming a doctor, dentist, lawyer, etc - chances are you can learn the information you need on your own and through on-the-job training and get more practical knowledge than you get studying the courses at college.
I went to college. I have a Bachelor of Science degree in Information Systems from the College of Saint Rose in Albany, NY. I minored in Business Administration. I even took a semester of graduate school towards an MBA before I realized I was a little crazy. We didn't have college savings when I started. I started in a State school, and did 3 years at the private college combined with classes online to save some money, and then took a semester of graduate level studies online. I've been paying on student loans since I was IN SCHOOL, even though I could have deferred them all until I graduated. I still owe over $45,000 and I've been out of college for over 6 years.
I loved my college years. I loved the classes, meeting new people, and all the experiences that went with it. But I don't love the price tag and don't feel that my degree made things any easier. I entered the "real world" with almost $80,000 in college debt (and that's after receiving scholarships and financial aid that didn't have to be repaid!) I believe I would have had an easier time if I didn't have all of that debt to start out my adult life.
Even though I feel that way, I wouldn't discourage my children from going to college. What I'd like to do for them instead, is set them up with a college fund that won't prevent their ability to get need-based financial aid (if we are still in need of assistance 12 years from now); and that makes it possible for them to go to college if they choose without getting into major debt. When my children are old enough to go to school, they're looking at $210,000+ for four years tuition at a local private school like the one I attended. I'm pretty sure the average annual income isn't going to increase as fast as the cost of college, so I'm applying the "start early, save often" rule to helping them prepare for college (or whatever they choose to do with their lives as they become adults.)
That's why I started the 529 accounts now, for my son's 6th birthday and my younger son's 3rd birthday.
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