Discussing a 529 with your kids

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noco-hawkeye
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Discussing a 529 with your kids

Post by noco-hawkeye » Sat Jan 20, 2018 6:01 pm

My kids are at the beginning of receiving college material, in their high school years. The pamphlets with pretty pictures, how every school is perfect and so special. Yada yada yada.....

During this process, we are asking our kids "how much does that school cost?", as we are trying to help make the decision with them, and coach them through this process as much as we can / should. They usually can find some rough numbers, which are almost always overwhelming to a high school student.

We've done a pretty good job in preparing for college with a 529. My question for others is - how did you approach this process and disclosing 529 information to your kids? We've setup a 529 for each kid, so having this discussion could be pretty straightforward. We've also tried to teach our kids that while you might have $X - this does not mean you need to spend $X (as a general financial rule / upbringing... LBYM etc).

lutus
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Re: Discussing a 529 with your kids

Post by lutus » Sat Jan 20, 2018 6:24 pm

Prior to discussing cost I will be discussing with my children the importance of choosing a marketable career path. If my kids choose a useless degree path I won't even tell them they have a 529!! :happy

On topic however, I would have the kids also look at the cost of living in the particular city where the colleges are located and add that into the cost of the tuition/books.

itstoomuch
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Re: Discussing a 529 with your kids

Post by itstoomuch » Sat Jan 20, 2018 6:33 pm

I made the mistake (?) in telling (soph/jr 2000/2001 ?) that he could attend any place he wanted to go to. He was/is a high caliber performer. We still have something like 40k in student loan debt but at 3%, manageable :x .
Good Luck, YMMV, watch out for bears and swans and politicians . :oops:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

Iorek
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Re: Discussing a 529 with your kids

Post by Iorek » Sat Jan 20, 2018 6:37 pm

My kid is only at the start of high school but knows he has a college fund-- we started it pretty much from birth and have discussed it as an example of long term saving we are doing. I think he knows the fund is enough for state school but may or may not be enough for private, but even if it's not that doesn't mean the private is unaffordable for us. I would be open about the 529 but you can still say that the smart thing to do might be to not spend it all on undergrad.

Whether you want to condition your financial assistance based on whether you think the tuition is worth it, or the course of studies makes the tuition worth it, is of course up to you.

livesoft
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Re: Discussing a 529 with your kids

Post by livesoft » Sat Jan 20, 2018 6:45 pm

Our kids had checking account and debit cards since about age 13 or 14. We paid their allowances by money transfer. They know about money.

When FAFSA time rolled around, we filled it out together, so my oldest knew about our entire financial situation. I'm a big believer in not hiding anything and telling the truth.

Both kids came in under budget, one on time, and one early saving even more money.
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noco-hawkeye
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Re: Discussing a 529 with your kids

Post by noco-hawkeye » Sat Jan 20, 2018 6:53 pm

A few points:

The kids know to get a job in a field that will pay good money. A degree in math / science with a focus on either engineering or healthcare are two fields we use as examples. The kids are on board with this. They also know living someplace expensive will be a tradeoff for future opportunities. My concern for them blowing through the money frivolously is not terribly high.

My concern was that if I tell them they have $89,345.53 (this is an example, not the balance), that they might start to look at more expensive schools or be extra stressed out that they have these big numbers in play. This is something they are going to have to git over, but stories like what is above really helps. I'm not the first or last one going through this process.

Thanks again all!

delamer
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Re: Discussing a 529 with your kids

Post by delamer » Sat Jan 20, 2018 7:02 pm

Is there a dollar limit on how much you are willing to spend on their undergrad? Would that vary depending on the school? Are you willing to let them take out loans, co-sign loans, or take out loans for them?

I’d focus on making those decisions and then have a discussion with your kids about what options they will have (or won’t), rather than talking about dollars. That was our approach.

livesoft
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Re: Discussing a 529 with your kids

Post by livesoft » Sat Jan 20, 2018 7:04 pm

529 assets are not the only money available, so I don't think my kids paid any attention to any dollar amounts. They certainly didn't pay attention to the free $12,000 from Federal government tax credits.
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noco-hawkeye
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Re: Discussing a 529 with your kids

Post by noco-hawkeye » Sat Jan 20, 2018 7:07 pm

Our philosophy is they each have a 529 that we try to contribute to equally. That's really theirs to budget with, and will be close to something like 4 yrs at a public school.

We can cash flow some extra, if we really felt like it was a good idea. Ideally I am going to start them with the 529, and have them try to make that last for an undergrad. If they want to go some place extra expensive and take out loans (which I don't think is likely), that is going to be a choice they make (with us somewhere on the sidelines nearby).

So if one of the kiddos goes through 4 years and then wants med school, we could help with a good chunk of that. Otherwise I don't think our assistance would be a major deal.

Yooper
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Re: Discussing a 529 with your kids

Post by Yooper » Sat Jan 20, 2018 7:23 pm

Our plan is to basically tell them, "Your 529 is x amount. Our suggestion would be for you to go to college xyz, or any other college/university that your 529 would cover all costs. However, it's your money so you can spend it any way you'd like. Keep in mind though, anything that's in excess of what's in your 529 comes out of your own pocket." Personally I'd be thrilled if they did a stint in the military before heading off to school, but that's another story.

Broken Man 1999
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Re: Discussing a 529 with your kids

Post by Broken Man 1999 » Sat Jan 20, 2018 7:24 pm

livesoft wrote:
Sat Jan 20, 2018 6:45 pm
Our kids had checking account and debit cards since about age 13 or 14. We paid their allowances by money transfer. They know about money.

When FAFSA time rolled around, we filled it out together, so my oldest knew about our entire financial situation. I'm a big believer in not hiding anything and telling the truth.

Both kids came in under budget, one on time, and one early saving even more money.
This! I think it is reasonable and proper for parents to share honest financial info that can used to help set their children's expectations.

I was/am a firm believer in sharing our financial situation with our children. We had the reality of having three in college at the same time. Our offer was to pay for full education at a state college/university. If private college/university was chosen, we would use their prepaid plan and the rest was up to them. As it turned out one daughter rode her viola to a full tuition scholarship at a small private university, graduated, and was offered free tuition to complete an MBA if she continued to play in the university orchestra. All those viola lessons really paid off. The other two daughters went to the university near where we live. I also offered the other two tuition payment if they wanted to earn a graduate degree. One accepted and earned hers.

They all launched successfully, without the burden of student debt. Our work is done for them.

We have turned our attention to the grandchildren, now. I can't think of anything else that gives me as much pleasure as helping the next generation.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

gwrvmd
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Re: Discussing a 529 with your kids

Post by gwrvmd » Sat Jan 20, 2018 7:36 pm

You are wondering when to "disclose the 529 info to the kids"?
From the time my kids were about 10 years old, I had a short class with each kid at the end of the year as we went over their Year End 529 Statement. What is a 529, how does it work, what is it for, what company is it with, what is it invested in and how much is it currently worth. You should be constantly sharing it with them as a learning experience not wondering when to "disclose it to them'. It is their money.......Gordon
Disciple of John Neff

Spirit Rider
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Re: Discussing a 529 with your kids

Post by Spirit Rider » Sat Jan 20, 2018 7:56 pm

lutus wrote:
Sat Jan 20, 2018 6:24 pm
Prior to discussing cost I will be discussing with my children the importance of choosing a marketable career path. If my kids choose a useless degree path I won't even tell them they have a 529!! :happy
noco-hawkeye wrote:
Sat Jan 20, 2018 6:53 pm
The kids know to get a job in a field that will pay good money. A degree in math / science with a focus on either engineering or healthcare are two fields we use as examples.
I have a real problem with both these statements. Hopefully with the emoji, the first is in jest. College education is a sunk cost. Your children are not an ROI. We all want our children to be successful in life. but even at BH money isn't everything.

It is good for parents to have discussions of career paths and likely income ranges and discourage frivolous pursuits. However, not every child is the same. There are those who excel in math or sciences and a STEM degree/career is a good choice. There are others who are totally different.

My oldest girl was clearly STEM all the way from early elementary school. They youngest is totally different. She is probably the brightest and most hardworking one, yet the path from academic interest to career path is not so clear. I do not love her any less or support her any less. She is well aware of what the choices are. I advise and consent, but I do not dictate.
Last edited by Spirit Rider on Sat Jan 20, 2018 7:57 pm, edited 1 time in total.

StealthRabbit
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Re: Discussing a 529 with your kids

Post by StealthRabbit » Sat Jan 20, 2018 7:57 pm

Consider discussing college financing about age 12. (So they can prepare!). Ours paid 100% of everything +/-.

No 529s (income tax free State with free college instead of High School). No benefit from 529.
Ours did ROTH since age 12 (not considered in thier FAFSA) :beer
By age 18, each had ~ $100k From investments and earnings and assets (equity in their own homes)

They went ahead and got deferred interest loans, and they stayed invested till interest was due. (As I recommend parents do as well)

All worked out well.

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sat Jan 20, 2018 8:10 pm

What does this have anything to do with it affecting the kid's choices. It is money under YOUR control (yes the ONLY situation in the IRS where a completed gift is still under full control of the giftee). Just tell them what your expectations are and that you will only support payment if under x conditions..

I am not sure why parents are so hesitant to lay down the law with their kids. There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

DIFAR31
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Re: Discussing a 529 with your kids

Post by DIFAR31 » Sat Jan 20, 2018 8:33 pm

staythecourse wrote:
Sat Jan 20, 2018 8:10 pm
There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).
If my kid enjoyed studying and did well in a certain major, that was a good excuse for me. If my kid loved the work that a career entailed and made a real difference, that was a good excuse for me. I can think of few things worse as a parent than to convince my kid that she needs to get a degree and get a job doing something she doesn't like doing, because it's all about the dollars.

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sat Jan 20, 2018 8:48 pm

DIFAR31 wrote:
Sat Jan 20, 2018 8:33 pm
staythecourse wrote:
Sat Jan 20, 2018 8:10 pm
There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).
If my kid enjoyed studying and did well in a certain major, that was a good excuse for me. If my kid loved the work that a career entailed and made a real difference, that was a good excuse for me. I can think of few things worse as a parent than to convince my kid that she needs to get a degree and get a job doing something she doesn't like doing, because it's all about the dollars.
To each their own. There are PLENTY of jobs and careers that folks like to do that pay money. You assume it is binary that high paying job means no enjoyment and low paying means satisfaction. Trust me I know PLENTY of folks that were in the situation you describe who now hate their job AND don't have money. It isn't like all the folks doing the stuff they like in college end up loving their job.

It is nonsense to spend money on an education for a job that has difficulty paying of the loans themselves that gave them that education. If you are talking about something rewarding there is NO cost to volunteer on your free time or take years off and travel to a third world country and make a real difference or an inner city and make a real difference.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

DIFAR31
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Re: Discussing a 529 with your kids

Post by DIFAR31 » Sat Jan 20, 2018 8:55 pm

You assume it is binary that high paying job means no enjoyment and low paying means satisfaction.
I am absolutely not making this assumption, and nothing in my post indicates such. If my kid has a great job that she loves and is making a pile of money, everything's good. If she hates going to work every day for reasons that aren't economic, no amount of money is going to fix that.

Rwsavory
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Re: Discussing a 529 with your kids

Post by Rwsavory » Sat Jan 20, 2018 9:05 pm

staythecourse wrote:
Sat Jan 20, 2018 8:10 pm
What does this have anything to do with it affecting the kid's choices. It is money under YOUR control (yes the ONLY situation in the IRS where a completed gift is still under full control of the giftee). Just tell them what your expectations are and that you will only support payment if under x conditions..

I am not sure why parents are so hesitant to lay down the law with their kids. There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).

Good luck.
Why are parents so hesitant to tell their kids what to study and major in? If you really don’t know, you’re setting yourself up for a spectacular failure. Forcing your child to study something they don’t like is foolish and shortsighted. Good luck, you will need it.

Yooper
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Re: Discussing a 529 with your kids

Post by Yooper » Sat Jan 20, 2018 9:17 pm

I think "staythecourse" 's paragraphs were directly related, and perhaps should have been one paragraph. I.e., if you want my money to pay for your school, I'm willing to fund this, but not that. I don't think they were saying they would dictate WHAT their child studied, just what type of studies they would be willing to financially support. At least that's how I read it. And I might be wrong. Wouldn't be the first time........

Rwsavory
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Re: Discussing a 529 with your kids

Post by Rwsavory » Sat Jan 20, 2018 9:46 pm

Yooper wrote:
Sat Jan 20, 2018 9:17 pm
I think "staythecourse" 's paragraphs were directly related, and perhaps should have been one paragraph. I.e., if you want my money to pay for your school, I'm willing to fund this, but not that. I don't think they were saying they would dictate WHAT their child studied, just what type of studies they would be willing to financially support. At least that's how I read it. And I might be wrong. Wouldn't be the first time........
Whatever. If you’re holding the money over your child’s head, you’re dictating.

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sat Jan 20, 2018 11:04 pm

Yooper wrote:
Sat Jan 20, 2018 9:17 pm
I think "staythecourse" 's paragraphs were directly related, and perhaps should have been one paragraph. I.e., if you want my money to pay for your school, I'm willing to fund this, but not that. I don't think they were saying they would dictate WHAT their child studied, just what type of studies they would be willing to financially support. At least that's how I read it. And I might be wrong. Wouldn't be the first time........
Correct. My point is if you are the owner of the money as it is in 529 plan vs. a UTMA/ UGMA account then YOU dictate what the money is to be used for. If you care it is in state then say so. If it is for certain fields of study say so. If it is for tuition, but not room and board then say so. It is your money to control not theirs.

Personally, no I would not support my kids going to school for a major that doesn't pay for itself. That is just bad business decision. I don't begrudge others for doing it as long as it is not me supporting it. I don't agree with college is so important for learning social skills. There are PLENTY of ways to do that that does not involve spending money that will never be recouped. One could just join the peace corp and take a year off and do volunteer teaching for the underprivileged. That is what I see as worthwhile. If my kid did not agree no problem I wouldn't force them in which case they can do x, y, or z on their own dime. That is life. It isn't like later in life they get what they want just because they won the gene lottery. I already do that to my KG kid and toddler. Life is not about hand outs with no strings attached (except for my love as a parent).

Again that is my feelings, but point is it is your ownership as the parent so do as YOU wish not what your KID wishes.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

HEDGEFUNDIE
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Re: Discussing a 529 with your kids

Post by HEDGEFUNDIE » Sat Jan 20, 2018 11:23 pm

Those who are dictating what their kids should major in once they get to college should give their kids a little more credit. I would posit that the vast majority of 17 year olds who are intelligent enough to get into college are also intelligent enough to know how remunerative various career tracks are. Choosing a less remunerative path may not be an immature decision, but rather a considered intellectual / lifestyle choice. Why assume that your kids have the same risk tolerance / consumption habits as you?

Also, one cannot always predict ahead of time what opportunities can open up. I studied philosophy in college out of pure academic passion, eventually found my way into a MBA management track a few years after graduation.

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sat Jan 20, 2018 11:31 pm

Rwsavory wrote:
Sat Jan 20, 2018 9:05 pm
staythecourse wrote:
Sat Jan 20, 2018 8:10 pm
What does this have anything to do with it affecting the kid's choices. It is money under YOUR control (yes the ONLY situation in the IRS where a completed gift is still under full control of the giftee). Just tell them what your expectations are and that you will only support payment if under x conditions..

I am not sure why parents are so hesitant to lay down the law with their kids. There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).

Good luck.
Why are parents so hesitant to tell their kids what to study and major in? If you really don’t know, you’re setting yourself up for a spectacular failure. Forcing your child to study something they don’t like is foolish and shortsighted. Good luck, you will need it.
When did I say I would choose their major? I said I would not pay if they chose a degree in something that will not recoup the education that it cost to get that degree. That is different then me saying, "My son is going to be a dentist and will only pay if he does that on field". As I said previous there are a TON of jobs out there that are fulfilling and that pay well. I don't begrudge those in the arts, but can't seem to forget the Northwestern drama student grad who I paid $20/ hour to put my kid's IKEA furniture together. Having him tell me that is basically what all his cohorts are doing with their degrees until they can get employed is not a life I want for my kids.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sat Jan 20, 2018 11:42 pm

HEDGEFUNDIE wrote:
Sat Jan 20, 2018 11:23 pm
Those who are dictating what their kids should major in once they get to college should give their kids a little more credit. I would posit that the vast majority of 17 year olds who are intelligent enough to get into college are also intelligent enough to know how remunerative various career tracks are. Choosing a less remunerative path may not be an immature decision, but rather a considered intellectual / lifestyle choice. Why assume that your kids have the same risk tolerance / consumption habits as you?

Also, one cannot always predict ahead of time what opportunities can open up. I studied philosophy in college out of pure academic passion, eventually found my way into a MBA management track a few years after graduation.
So basically, you are saying trust the high schooler as they know what they are getting into yet you graduated with a philosophy degree and decided to do something else which just happens to pay better? If high schoolers who are intelligent enough to know as you proclaim then why would any of them switch majors or career paths. Why are there so many more undecided majors and liberal arts degrees now then in 1950's (someone awhile posted a great comparison).

Thinking kids know much about careers and finances is naive. That is not their fault, but ours. How many folks have shown their kids their paycheck and show the taxes taken out and gone over where each dollar goes for the month? If not, then how do you expect them to know if living off 50k (for example as their parents income) is enough to even live their current lifestyle or if they need to earn more if they want something better then they currently grew up with.

Funny you life choices are the argument AGAINST letting kids choose.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

smectym
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Re: Discussing a 529 with your kids

Post by smectym » Sat Jan 20, 2018 11:47 pm

I don’t agree with the approach of those parents who would condition release of 529 funds on their kid choosing a major that in the view
of the parent will lead to a high-paying job. But I understand that point of view. Perhaps the better approach is to make your case with the college-bound kid and also listen to the kid’s point of view. Come to terms.

I deliberately put only so much into our son’s undergrad 529 to pay in-state tuition at a state school (like UCLA). Naturally, therefore, he wanted to go to NYU to major in “Global Liberal Studies”!

He got accepted to NYU off the wait list in early September. Probably the last kid admitted. Not a dime in scholarships.

We said OK (relevant fact: I’m an NYU alum so probably wasn’t thinking entirely straight). He did pretty well, including enjoying a full academic year abroad in Paris. And he’s just been accepted to a top law school (there’s a separate, realistically funded 529 for that) and seems fully focused on achieving a career that will be personally rewarding and also make money.

But if the NYU call had meant going deeply into student loan debt, I can fully understand parents blowing the whistle and making clear that “That’s not OK.” In my view, the clear imperative isn’t dictating the student’s major, but making clear that incurring heavy student loan debt is almost always a horrible and possibly devastating mistake. So if the 529 represents the full extent of a family’s ability to underwrite college without going into debt, it’s entirely legitimate to make crystal clear to the budding scholar that the college search must be tailored to the 529.

RetiredCSProf
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Re: Discussing a 529 with your kids

Post by RetiredCSProf » Sun Jan 21, 2018 1:44 am

When my son was applying to colleges for his Freshman year, I told him that there was enough money in his 529 fund to cover at least two years at any college that he chose to attend. He was accepted at two private schools, both of which offered enough scholarship money to bring the tuition cost down to the price of the out-of-state public schools, which accepted him but offered little or no scholarship.

That is, private schools generally have more scholarship money to offer than public schools. Thus, an out-of-state public school may turn out to be more expensive than a private school.

My son decided to attend community college and continue living at home, leaving his 529 fund in tact. He plans to transfer in the fall to complete his undergraduate degree. He has decided to stay in-state. If he transfers to a local private school, he is likely to finish within two years; however, it may take him three years to finish at an in-state public school. This is partly due to over-crowding and competition to get into required classes at in-state schools, but also related to my son's interest in multi-disciplinary majors offered at in-state schools.

Look for statistics that show the percentage of students at each university who finish an undergraduate degree within four years.

In other words, the tuition and fees at each school tells only part of the story.

itstoomuch
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Re: Discussing a 529 with your kids

Post by itstoomuch » Sun Jan 21, 2018 2:05 am

itstoomuch wrote:
Sat Jan 20, 2018 6:33 pm
I made the mistake (?) in telling (soph/jr 2000/2001 ?) that he could attend any place he wanted to go to. He was/is a high caliber performer. We still have something like 40k in student loan debt but at 3%, manageable :x .
Good Luck, YMMV, watch out for bears and swans and politicians . :oops:
OP, I do hope that you know that I was kidding here.
The Only showed great potential very early and we wanted to give him the opportunity to attend the school of choice without regard to money. If he wanted to attend a public then any excess funds would be used for setting him up after college. He knew that we had many sacrifices and that he had rare gifts that shouldn't be wasted.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

HEDGEFUNDIE
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Re: Discussing a 529 with your kids

Post by HEDGEFUNDIE » Sun Jan 21, 2018 3:19 am

staythecourse wrote:
Sat Jan 20, 2018 11:42 pm
HEDGEFUNDIE wrote:
Sat Jan 20, 2018 11:23 pm
Those who are dictating what their kids should major in once they get to college should give their kids a little more credit. I would posit that the vast majority of 17 year olds who are intelligent enough to get into college are also intelligent enough to know how remunerative various career tracks are. Choosing a less remunerative path may not be an immature decision, but rather a considered intellectual / lifestyle choice. Why assume that your kids have the same risk tolerance / consumption habits as you?

Also, one cannot always predict ahead of time what opportunities can open up. I studied philosophy in college out of pure academic passion, eventually found my way into a MBA management track a few years after graduation.
So basically, you are saying trust the high schooler as they know what they are getting into yet you graduated with a philosophy degree and decided to do something else which just happens to pay better?
Yup that’s exactly what I’m saying. If my child chooses to study philosophy (or theatre or art), I would expect him/her to know (or to find out) what the likely career paths are, what it takes to achieve those careers, what those careers pay (and what that means for their lifestyles), and finally what backup options exist if plans don’t work out. On the last point, one thing I would insist upon is academic excellence in whatever field they chose, which gives them the freedom to do something else. We are fortunate to live in a developed economy where many employers are willing to take on smart liberal arts majors who have demonstrated passion and dedication in unrelated topics.

Getting (somewhat) back on topic, it seems to me that true Bogleheads would be torn between paying for their kid to study philosophy vs withholding funds and having to pay taxes + 10% penalty on a non-qualified 529 distribution :D

doingwell
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Re: Discussing a 529 with your kids

Post by doingwell » Sun Jan 21, 2018 7:58 am

HEDGEFUNDIE wrote:
Sun Jan 21, 2018 3:19 am
staythecourse wrote:
Sat Jan 20, 2018 11:42 pm
HEDGEFUNDIE wrote:
Sat Jan 20, 2018 11:23 pm
Those who are dictating what their kids should major in once they get to college should give their kids a little more credit. I would posit that the vast majority of 17 year olds who are intelligent enough to get into college are also intelligent enough to know how remunerative various career tracks are. Choosing a less remunerative path may not be an immature decision, but rather a considered intellectual / lifestyle choice. Why assume that your kids have the same risk tolerance / consumption habits as you?

Also, one cannot always predict ahead of time what opportunities can open up. I studied philosophy in college out of pure academic passion, eventually found my way into a MBA management track a few years after graduation.
So basically, you are saying trust the high schooler as they know what they are getting into yet you graduated with a philosophy degree and decided to do something else which just happens to pay better?
Yup that’s exactly what I’m saying. If my child chooses to study philosophy (or theatre or art), I would expect him/her to know (or to find out) what the likely career paths are, what it takes to achieve those careers, what those careers pay (and what that means for their lifestyles), and finally what backup options exist if plans don’t work out. On the last point, one thing I would insist upon is academic excellence in whatever field they chose, which gives them the freedom to do something else. We are fortunate to live in a developed economy where many employers are willing to take on smart liberal arts majors who have demonstrated passion and dedication in unrelated topics.

Getting (somewhat) back on topic, it seems to me that true Bogleheads would be torn between paying for their kid to study philosophy vs withholding funds and having to pay taxes + 10% penalty on a non-qualified 529 distribution :D
I agree with Hedgefundie. As a college professor, I work with many smart, hardworking undergraduates on a daily basis. Their experience with college varies widely so I hesitate to draw sweeping conclusions. However, those who are majoring in a discipline for employment prospects or, even more commonly, majoring in something because of parental pressure (or mandate) are easy to pick out. Some talk openly about it. They are less likely to work hard and more apathetic. These things translate into poorer outcomes, not just in my course but across the four years and beyond.

I teach in a STEM field with excellent employment prospects. The students who truly love it, regardless of native ability, can succeed and find joy (and long-term career stability) in it. Those shoehorned into it often don’t attained the same outcomes.

Meeting with junior and senior advisees who are STEM majors, particularly those destined for graduate school or Med school, I often find myself giving heretical advice: take things that sound of interest “across campus”, those humanities classes. It will be their last chance through formal education and the invaluable skills (writing, critical reading, argument construction) will serve them well but even that is just a bonus earned while covering interesting material.

We had a very successful STEM alumna give a seminar on campus recently. When a current student asked what prepared her best for rapid success in her technical field her response was taking all those French classes. She learned communication skills that have been indispensable. She learned different, complimentary ways of thinking.

All that said, I’m sure it won’t be as easy to put in practice when my early HS-er is going though this himself...

AllMostThere
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Re: Discussing a 529 with your kids

Post by AllMostThere » Sun Jan 21, 2018 9:06 am

staythecourse wrote:
Sat Jan 20, 2018 8:10 pm
What does this have anything to do with it affecting the kid's choices. It is money under YOUR control (yes the ONLY situation in the IRS where a completed gift is still under full control of the giftee). Just tell them what your expectations are and that you will only support payment if under x conditions..

I am not sure why parents are so hesitant to lay down the law with their kids. There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).

Good luck.
I cannot agree more. It is a parents job to guide and direct a young adult to enable their successful launch into adulthood. A 529 is just one element of this parental wisdom that gives them choices that must be realistic. How many of us have listened to a Dave Ramsey episode of a recent college grad from Blah Blah Private College with a degree is Antarctic Art History with +$100K in loans and cannot find a job or they have a job paying $28K! This uncorrected path ensures a kid stays on the parents payroll to even survive. It all comes down to cost-benefit and most, not all, kids will need this guidance. It's never easy. Good Luck.
Last edited by AllMostThere on Sun Jan 21, 2018 9:12 am, edited 1 time in total.

noco-hawkeye
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Re: Discussing a 529 with your kids

Post by noco-hawkeye » Sun Jan 21, 2018 9:07 am

The point about coaching your kids to obtain degrees that make better money -

I have no problem with my kids taking philosophy, theatre, orchestra, etc classes. I think these are useful and do help create a more well rounded person.

What I do have a problem with is paying for these things at some of the most expensive institutions. The cost of education is too high in this country (imo), and if you are paying 20-60k / year, you need to view this as one of the largest transactions you will make in your young life. You can get a philosophy degree and then get your MBA and have a great career, I have no doubt. But we have limited resources we are dealing with (the 529 in this case), and I think its important that kids make college decisions with some constraints like there is no bottomless pit of money to get a 6 year undergraduate degree.

** I was fortunate enough to attend a smaller school that cost a ton of money. Looking back on it, I am glad for the experience I had. However, we paid more money that we should have and there was a more efficient way to end up to where I am today. It is not lost on me that college does include an experience component that is worth some amount of money.

noco-hawkeye
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Re: Discussing a 529 with your kids

Post by noco-hawkeye » Sun Jan 21, 2018 9:09 am

AllMostThere wrote:
Sun Jan 21, 2018 9:06 am
staythecourse wrote:
Sat Jan 20, 2018 8:10 pm
What does this have anything to do with it affecting the kid's choices. It is money under YOUR control (yes the ONLY situation in the IRS where a completed gift is still under full control of the giftee). Just tell them what your expectations are and that you will only support payment if under x conditions..

I am not sure why parents are so hesitant to lay down the law with their kids. There is not excuse for allowing kids to pick majors and careers that can't even pay of the education amount (no matter who pays).

Good luck.
I cannot agree more. It is a parents job to guide and direct a young adult to enable their successful launch into adulthood. A 529 is just one element of this parental wisdom that gives them choices that must be realistic. How many of us have listened to a Dave Ramsey episode of a recent college grad from Blah Blah Private College with a degree is Antarctic Art History with +$100K in loans and cannot find a job or they have a job paying $28K! This uncorrected path ensures a kid stays on the parents payroll to even survive. It all comes down to cost-benefit and most, not all, will kids need this guidance. It's never easy.
Bingo / +1

Maya1234
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Re: Discussing a 529 with your kids

Post by Maya1234 » Sun Jan 21, 2018 9:16 am

We saved our money ( relatively high salaries) and lbym for 2 reasons:
1) retirement
2) education

When our kids were in high school we told them they could go to whatever college they wanted. No loans necessary. And my daughter said “Oh so that’s why we almost never go on vacation and our house is smaller than all my friends’ houses.”

Yep.

Oh and I have an engineer and a nurse by their strong desire so no issue with practical majors.

wrongfunds
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Re: Discussing a 529 with your kids

Post by wrongfunds » Sun Jan 21, 2018 9:24 am

Best advice on child rearing is *always* given by somebody who is childless. Take it any way you want to interpret this snarky comment.

AllMostThere
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Re: Discussing a 529 with your kids

Post by AllMostThere » Sun Jan 21, 2018 9:26 am

Maya1234 wrote:
Sun Jan 21, 2018 9:16 am
We saved our money ( relatively high salaries) and lbym for 2 reasons:
1) retirement
2) education

When our kids were in high school we told them they could go to whatever college they wanted. No loans necessary. And my daughter said “Oh so that’s why we almost never go on vacation and our house is smaller than all my friends’ houses.”

Yep.

Oh and I have an engineer and a nurse by their strong desire so no issue with practical majors.
Maya1234, your response is awesome! I think you just validated most of us BH's. Having our kids witness and live a BH/LBYM lifestyle will make this college and major discussion much easier. :sharebeer

ENT Doc
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Re: Discussing a 529 with your kids

Post by ENT Doc » Sun Jan 21, 2018 9:41 am

I feel like how to deal with a 529 deserves its own section in one's IPS! I agree with the limits approach - setting per year limits and/or setting limits based on academic performance. Not sure how I feel about my child knowing our finances. Kids talk, kids make bad decisions, kids haven't necessarily adopted a Bogleheads mindset regardless of how astute they appear to be. I am a firm believer that if you know you have a cushion to catch you if you falter you're much more willing to take careless risks or be less motivated. If anything they will know they have no cushion and will learn that any success they want in life has to be achieved through one's own hard work and sacrifice. That is perhaps the most important lesson I'd like them to take away from the college experience.

miamivice
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Re: Discussing a 529 with your kids

Post by miamivice » Sun Jan 21, 2018 10:06 am

noco-hawkeye wrote:
Sat Jan 20, 2018 6:53 pm
A few points:

The kids know to get a job in a field that will pay good money. A degree in math / science with a focus on either engineering or healthcare are two fields we use as examples. The kids are on board with this.
I am not on board with your comments. Engineering is a very rigorous college major, and there are few that can successfully matriculate. It's not a simple thing like "I want to make money therefore I am going to be an engineer", but something that one has to have strong aptitude, a rigorous math/science curriculum in high school, and a bit of luck to finish as an engineer.

About 1 in 3 prospective engineers actually matriculate. A common tactic in Day 1 of Engineering 101 is to say "turn your head left and look at the student on your left. Then look at the student on your right. One of you will graduate. Who will it be?"

shawndoggy
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Re: Discussing a 529 with your kids

Post by shawndoggy » Sun Jan 21, 2018 10:14 am

noco-hawkeye wrote:
Sat Jan 20, 2018 6:53 pm
My concern was that if I tell them they have $89,345.53 (this is an example, not the balance), that they might start to look at more expensive schools or be extra stressed out that they have these big numbers in play. This is something they are going to have to git over, but stories like what is above really helps. I'm not the first or last one going through this process.
If that were your entire college funding warchest, sad to say, but at current prices, $90K is a substantial limiter, not an enabler. Basically (depending on your state) that should be able to get you a 4 year degree in-state. Out of state publics or private schools? Nope!

Top tier privates (stanford, harvard, yale, duke, georgetown, etc) are basically $300k for a 4 year degree these days, with zero merit aid. Flagship out of state publics (UC schools, for instance) are about $200k for a four year degree (but check the % of kids who actually graduate in 4... VERY low... 5 is the new 4 at publics).

So unless you have $250k+ for each kid or are likely to get substantial scholarships from somewhere, you should educate your kids that that amount of money, while large, is NOT a ticket to go anywhere.

annielouise
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Re: Discussing a 529 with your kids

Post by annielouise » Sun Jan 21, 2018 10:14 am

This discussion seems to have veered.

From my experience, I would not disclose the amount of the 529, or even the existence of it. Rather let them know that YOU have money to help with the cost of college. I have found that students see the money as "theirs" which can cause issues. Encourage smart choices. My advice would be to go the best school where you can get top grades.

An example: DH and I are very close in intelligence. We both went to college for EE degrees. He went to a top school where he struggled for good grades. I went to a state school with a partial scholarship and was at the top of my class. Both schools were considered good for EE degrees. I received nearly a dozen job offers; he received 2. His lower grades haunted his job hunts until he got a master's degree.

HEDGEFUNDIE
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Re: Discussing a 529 with your kids

Post by HEDGEFUNDIE » Sun Jan 21, 2018 10:32 am

noco-hawkeye wrote:
Sun Jan 21, 2018 9:07 am
The point about coaching your kids to obtain degrees that make better money -

I have no problem with my kids taking philosophy, theatre, orchestra, etc classes. I think these are useful and do help create a more well rounded person.

What I do have a problem with is paying for these things at some of the most expensive institutions. The cost of education is too high in this country (imo), and if you are paying 20-60k / year, you need to view this as one of the largest transactions you will make in your young life. You can get a philosophy degree and then get your MBA and have a great career, I have no doubt. But we have limited resources we are dealing with (the 529 in this case), and I think its important that kids make college decisions with some constraints like there is no bottomless pit of money to get a 6 year undergraduate degree.

** I was fortunate enough to attend a smaller school that cost a ton of money. Looking back on it, I am glad for the experience I had. However, we paid more money that we should have and there was a more efficient way to end up to where I am today. It is not lost on me that college does include an experience component that is worth some amount of money.
I understand the sentiment here, and certainly there is a class of private colleges that charge way more than they should get away with given their students’ outcomes.

On the other hand, some of the highest paying jobs available to fresh college grads (investment banking, management consulting, etc.) only recruit from a small group of equally expensive schools, and these are the same jobs (though not the only ones) that are completely open to accomplished liberal arts majors. The starting salary + bonus at McKinsey, Goldman Sachs, etc. is in the six figures, not a bad outcome for parents of a philosophy major paying any level of tuition.

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sun Jan 21, 2018 2:43 pm

Back to the original question on this thread... why would you NOT tell your kids about the financial resources they will have for college? Shouldn't that help motivate them to know that some financial freedoms are there as not to restrict them in what they want to do, i.e. "Boy I really like biology, but don't see how I would get around to paying for college and then med school so better forget about it?" Folks are assuming there kids instead will go, "Boy I have a ton of money for college I am going to whatever party school in California I can get into now since I don't have to take loans out".

Even if the kid does say the latter just say no. You are the one who controls those purse strings. As each generation goes by I see more and more parents having difficulty saying no to their kids.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

getthatmarshmallow
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Re: Discussing a 529 with your kids

Post by getthatmarshmallow » Sun Jan 21, 2018 3:16 pm

lutus wrote:
Sat Jan 20, 2018 6:24 pm
Prior to discussing cost I will be discussing with my children the importance of choosing a marketable career path. If my kids choose a useless degree path I won't even tell them they have a 529!! :happy

On topic however, I would have the kids also look at the cost of living in the particular city where the colleges are located and add that into the cost of the tuition/books.
Hey, where'd I put that soapbox? 8-)

So I imagine this is said tongue-in-cheek. But seriously. Imagine you have two kids. First kid wants to be an engineer, so you pull out the checkbook. Second kid wants to be a journalist, and major in English, so you look him firmly in the eye and said -- oh, we didn't save money for you. Or your kid quietly decides that she's going to go to community college, insisting whenever you ask that's all she wants, because Daddy's never discussed paying for college with her so she assumes you can't afford it and doesn't want to embarrass you.

Or your kid is like a former student of mine at pricey liberal arts college, a brilliant woman with a high GPA and a stellar amount of talent in creative writing and game design. But daddy said that if she changed majors from finance he'd pull her out of school and send her to the state college. This is a model of a healthy relationship to which we should all aspire.

But more seriously, as a college prof, I think the most important thing is that students avoid life-crushing amounts of debt. But average student debt is quite a lot lower (about $29K) than the articles about art majors with $200K in debt would have you think, and IME, the calculation about whether a school/degree is worth is different than the standard conversation.

I'd say that if your kid wants to major in a marketable field (note: not always what people think is marketable), their best ROI (note: not your ROI) is going to be your local Directional State University. Pedigree matters somewhat less in tech. And if your kid wants to focus on the humanities or head to grad school, the elite/Ivy route opens more doors. So somewhat paradoxically, your English major would be better off at Harvard than at state, on the assumption you can afford both.

I plan to be honest about what we can afford when the kids are in high school, and by then I hope they'll have internalized my values.

multiham
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Re: Discussing a 529 with your kids

Post by multiham » Sun Jan 21, 2018 3:48 pm

I have 1 child in high school and 1 in middle school. They both know exactly how much I am trying to save for them in the 529 plan. My oldest child understands that I'm saving a higher absolute amount for my youngest as she is 3 years behind him and costs will continue to increase. If everything works out as planned, I will have saved enough for 90% of an in-state Public college.

With my oldest, we sit down quite frequently and review the colleges he is interested in and review the pros/cons. We always discuss the cost and what attending this school means to his future finances. We discuss possible majors and I help them understand that certain schools on their list are better than others for their desired field of study. I'll explain that MIT is a great school and good value if you are studying aerospace engineering, but may not be the same value if you are studying Philosophy. Lets see if we can't find a better choice for you that checks off your requirements but may be a better overall fit for you.

I enjoy spending the time with my kids discussing their thoughts. They have really pleasantly surprised me with their critical thinking.

Both my wife and I paid 100% of our own college costs back in the 1980's. One of the best things about saving money all these years is that I can help them with their college costs while still making sure they have some skin in the game. My wife and I are proud of our kids and will help support their development the best we can. Please know that my definition of support is much broader than just financial.

getthatmarshmallow
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Re: Discussing a 529 with your kids

Post by getthatmarshmallow » Sun Jan 21, 2018 3:55 pm

multiham wrote:
Sun Jan 21, 2018 3:48 pm
I have 1 child in high school and 1 in middle school. They both know exactly how much I am trying to save for them in the 529 plan. My oldest child understands that I'm saving a higher absolute amount for my youngest as she is 3 years behind him and costs will continue to increase. If everything works out as planned, I will have saved enough for 90% of an in-state Public college.

With my oldest, we sit down quite frequently and review the colleges he is interested in and review the pros/cons. We always discuss the cost and what attending this school means to his future finances. We discuss possible majors and I help them understand that certain schools on their list are better than others for their desired field of study. I'll explain that MIT is a great school and good value if you are studying aerospace engineering, but may not be the same value if you are studying Philosophy. Lets see if we can't find a better choice for you that checks off your requirements but may be a better overall fit for you.

I enjoy spending the time with my kids discussing their thoughts. They have really pleasantly surprised me with their critical thinking.

Both my wife and I paid 100% of our own college costs back in the 1980's. One of the best things about saving money all these years is that I can help them with their college costs while still making sure they have some skin in the game. My wife and I are proud of our kids and will help support their development the best we can. Please know that my definition of support is much broader than just financial.
MIT has one of the best philosophy departments in the country, and their graduates do really interesting work. If kid is really interested in philosophy, MIT would be a good (but not the only) choice.

multiham
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Re: Discussing a 529 with your kids

Post by multiham » Sun Jan 21, 2018 6:35 pm

Sorry if I implied my son was looking at MIT. He is not. I was just using this as an example (must have been a poor choice). I know a few people in the aerospace industry and know that an MIT degree is really valued, had no clue it was a good philosophy school.

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gasdoc
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Re: Discussing a 529 with your kids

Post by gasdoc » Sun Jan 21, 2018 8:02 pm

I never actually mentioned the amount in the 529, but she can figure it out easy enough. I told her it was enough to cover 4 years at any school she would choose, and if she chose a cheaper school, or got scholarship money, she could use the rest of the money for grad school (she is pre-med). She is currently a college freshman.I have told her I will try to help her out with the remainder of grad school, but she is aware that I have become very money conscience because I would like to retire in the next 3-5 years. It is kind of funny- she apologizes for doing things that cost me money (like dislocating her elbow recently). Funny, also, she gets anxious when I take an expensive vacation or when I cut back on my hours at work. I think she "gets it."

gasdoc

staythecourse
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Re: Discussing a 529 with your kids

Post by staythecourse » Sun Jan 21, 2018 8:15 pm

gasdoc wrote:
Sun Jan 21, 2018 8:02 pm
I never actually mentioned the amount in the 529, but she can figure it out easy enough. I told her it was enough to cover 4 years at any school she would choose, and if she chose a cheaper school, or got scholarship money, she could use the rest of the money for grad school (she is pre-med). She is currently a college freshman.I have told her I will try to help her out with the remainder of grad school, but she is aware that I have become very money conscience because I would like to retire in the next 3-5 years. It is kind of funny- she apologizes for doing things that cost me money (like dislocating her elbow recently). Funny, also, she gets anxious when I take an expensive vacation or when I cut back on my hours at work. I think she "gets it."

gasdoc

Just curious if you regret letting them know if it is causing them ANY concern. I would assume she feels enough internal pressure trying to get into med. school. Feeling anxious about the costs seems to be the opposite of what letting kids know about having a 529 plan is all about. No?

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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gasdoc
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Re: Discussing a 529 with your kids

Post by gasdoc » Sun Jan 21, 2018 8:47 pm

staythecourse wrote:
Sun Jan 21, 2018 8:15 pm
gasdoc wrote:
Sun Jan 21, 2018 8:02 pm
I never actually mentioned the amount in the 529, but she can figure it out easy enough. I told her it was enough to cover 4 years at any school she would choose, and if she chose a cheaper school, or got scholarship money, she could use the rest of the money for grad school (she is pre-med). She is currently a college freshman.I have told her I will try to help her out with the remainder of grad school, but she is aware that I have become very money conscience because I would like to retire in the next 3-5 years. It is kind of funny- she apologizes for doing things that cost me money (like dislocating her elbow recently). Funny, also, she gets anxious when I take an expensive vacation or when I cut back on my hours at work. I think she "gets it."

gasdoc

Just curious if you regret letting them know if it is causing them ANY concern. I would assume she feels enough internal pressure trying to get into med. school. Feeling anxious about the costs seems to be the opposite of what letting kids know about having a 529 plan is all about. No?

Good luck.
I don't understand what you mean- I may not be able to pay for all of a four year education in medical school and it would mean taking out some loans to finish. My goal is to pay for as much as possible. Her goal is to get by with as little loans as possible. Maybe anxiety is not the correct term. Are you thinking it would be better not to tell her what is in the account? I think I have done well in getting over $250K in that account, and the rest will depend upon finances. I don't think it would be terrible if she had to take out some amount of loans to finish med school, though I would feel pride if she could start a medical career debt free.

gasdoc

Pigeon
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Re: Discussing a 529 with your kids

Post by Pigeon » Sun Jan 21, 2018 9:07 pm

Our deal is that we pay for 4 years at a state school or the equivalent if they want to go elsewhere. We saved some of that in 529s, but how we were funding it doesn't matter to the kids.

We don't tell them what to major in. What we did was have them spend some time with the Occupational Outlook Handbook and have a plan. I work at a large state university. I encounter a lot of students who are kind of bitter that nobody ever talked to them about what they are going to do with a degree in sociology--they picked it because it's easy, after taking a gen ed or two in it, and then are surprised that getting a job is a challenge.

On the other hand, I don't believe forcing a kid to be an engineer or an accountant is a good idea, either. My father did something similar and I had to get a degree is something he approved of. It was a mistake, and I didn't like the field at all, after getting a degree in it and working for a few years. It's a ridiculous and unrealistic level of control to try to pick your kid's career. They have to like what they do, at least to some degree. My older kid has many friends with parents who think the only acceptable options for those kids are to be doctors or engineers. Those kids are largely miserable.

I do think making the kid have a plan has some merit. I fully expect that their lives won't follow the plan. Most people do have a few career changes these days. But my making a plan, they are forced to do a little research and to get an idea of what careers require what degrees, what starting salaries and employment prospects are like. I don't want them to feel like they got a useless degree because of a lack of information. When they think about changing the plan, they'll know how to find information.

I'm not so sure that I really think there are useless degrees, in that people with a degree tend to earn more during their lifetimes. And people with liberal arts degrees ultimately actually end up with higher salaries by the time they retire than people with STEM degrees. They do have a harder time starting out, however.

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