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Paying For Three Kids To Go To College Is Going To Be Expensive


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
2006 7 2000.00

2007 8 4160.00 3 2000.00

2008 9 6492.80 4 4160.00 Birth 2000.00
2009 10 9012.22 5 6492.80 1 4160.00
2010 11 11733.20 6 9012.22 2 6492.80
2011 12 14671.86 7 11733.20 3 9012.22
2012 13 17845.61 8 14671.86 4 11733.20
2013 14 21273.26 9 17845.61 5 14671.86
2014 15 24975.12 10 21273.26 6 17845.61
2015 16 28973.12 11 24975.12 7 21273.26
2016 17 33290.97 12 28973.12 8 24975.12
2017 18 37954.25 13 33290.97 9 28973.12

14 37954.25 10 33290.97

15 42990.59 11 37954.25

16 48429.84 12 42990.59

17 54304.23 13 48429.84

18 60648.57 14 54304.23

15 60648.57

16 67500.45

17 74900.49

18 82892.53

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.

For much more about ESAs, checkout this Wikipedia article, this article from Fool, and this article from Saving For College.

13 thoughts on “Paying For Three Kids To Go To College Is Going To Be Expensive

  1. My daughter just turned seven. We are going to start her account this year, but we have just been overwhelmed by the amount of information from various brokers, insurance companies, etc.

    Thanks for the links to the additional information!

  2. We are now debt free. We also have 3-6 monthes put back for emergencies. We have 2 money market accounts. Now what? Do we just keep saving?



  3. A very interesting look into how planning for the very real expense of college. Thanks! The one question I have is your assumed growth rate. How can you assume that the ESAs will return an average of 8% over the next 18 years? That seems quite optimistic to me.

  4. @Renee.. Great job! After getting out of debt and saving our emergency fund… we then focused on long-term savings in our retirement accounts… I’ll write a post and have it up by 1PM Eastern today, w/ details…

    @Steve T … I’ve seen various average returns for the S&P 500… most say that it averages a 9 to 12 percent return, so my 8 percent may actually be conservative, depending on what actually happens w/ the market… i purchase etfs based on the broad market…


  5. I’m glad you’re both saving for you kids’ education and expecting them to pay for some of it themselves.
    My siblings and I all paid our own way through school, and I think it helped all of us learn to appreciate the education and work hard while we were in school.

  6. I guess I may have a different view on this than most… Can the money you put into their ESA’s be used for anything other than college?

    I ask because in my own experience, my two elder siblings both had savings accounts for college and spent them frivolously on cars. Right now they’re still living with my parents (27 and 25 years old). Whereas my wife and I paid our own way through college and have jobs, our own house, cars, etc.

    We were thinking of starting a savings account, but if they don’t use it for college they don’t get the money. It gives them an incentive to go to college, but not one to spend my hard-earned money on unnecessary things and get themselves into debt.

  7. I attended UGA on the Hope- what a wonderful thing! Thanks to help from my parents I graduated loan-free. I hope your kids are able to have the same experience.

  8. @R.J – It’s my understanding that funds can be transferred from one sibling to another – so, even if one kid doesn’t go to college, the money in that account can go to another kid… also, the money can be used for pre-college education expenses, like stuff for high school…

    @Brandon – ESAs offer more investment options – I can pick and choose the funds I want to purchase…

  9. Another option that I saw a lot of when I lived in New York State but not so much in Georgia, is for students to spend their first two years at a community college and then transfer to a private university or a large public university. Folks only care about where you graduated from, not where you spent your first two years.

  10. I commend you on maxing the ESA accounts. We don’t have kids yet but the future bill for college is mind blowing. Inflation will cut a big chunk out of what you manage to save as well. In recent years the increase in tuition has been at least double to rate of normal inflation. Unless something changes on the political front your 8% annual return will just barely beat the growth in tuition. That’s a scary thought.

  11. Note re: lottery scholarships. Here in Fla. we have a similar program called Bright Futures which has been very popular, so popular that they are now considering making it harder to qualify for the program.

  12. This is very wise.

    As a university faculty member, one of the things I find especially annoying about higher education in the United States is the amount of debt young people are forced to assume to get degrees, even at undistinguished public institutions. I happen to work for one of those, a vast learning factory whose leadership has never understood the distinction between quality and quantity.

    Regular jumps in tuition vastly outstrip inflation; the cost of textbooks is shameful. My dean recently told me the Powers That Be want to convert my research assistants to hourly workers so that the college won’t have to cover tuition waivers and health insurance. And the Hot New Thing is to tack a surcharge on specific programs perceived to be in demand among students. After an ambitious PR campaign to popularize an interdisciplinary and highly questionable “master’s of liberal arts” program, the university added a $12,000 surcharge for the privilege of enrolling in a program that will leave you eminently unemployable.

    When costs go up to the point where students are strapped for decades after they graduate, it’s not surprising young people no longer value a broad education but instead see the university as a place to get high-priced vocational training.

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