My wife and I have two children (and a third on the way) – and we think that it’s important to save for their college educations.
Our oldest daughter is eight, our son is four, and our daughter will be born in the next two months. We have been saving for our daughter’s education since 2006 and our son’s since 2007. Once the baby is born, we’ll begin saving for her college education, as well.
I’ve created a chart of our current plan –
|Year||Child 1||ESA 1||Child 2||ESA 2||Child 3||ESA 3|
Our plan assumes an 8% annual return on our investments. We make contributions to Educations Savings Accounts (ESAs). The annual limit for 2008 is $2000 per ESA, per child.
One of the unique things about the ESA is that, once a child reaches 18, no more contributions can be made to that child’s account. For my daughter, I have 10 more contributions to make. For my son, I have 15 more contributions to make. For my newborn, I have 19 contributions to make.
Adding 15+10+19 = 44 contributions of $2000 between now and 2026! That, my good friends, is $88,000.
We live in Georgia, where most students qualify for the Hope Scholarship – which pays for public education with proceeds from the lottery. I have no idea if the Hope Scholarship will be available for my kids – but I do know that I want to have a substantial amount saved for their educations, just in case the scholarship is no longer around.
Clearly, even if we save the amounts indicated above, we’ll still have to include a ‘College Expenses’ category in our future budgets. In other words, we’ll save for college in the ESAs, but we’ll also help our kids to pay for college expenses, after they’re actually attending. Plus, we’ll expect our kids to work while at school, and we’ll expect for them to pay for some portion of their educations.