Telling Kids about 529 plans

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bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

stoptothink wrote: Wed Oct 13, 2021 3:52 pm To many, a parent-funded college education is simply a right. My kids will be the first on either side of the family to get ANY financial help with college (and there are 9 college graduates between my wife's siblings and mine). My wife was totally against saving for or even paying for any of their college at all until the last few years, when she actually finished school herself (working full-time the entire way through) and we hit some financial milestones. We don't have any definite plans now, but I'd honestly be shocked if my wife was OK continuing to drain the 529 unless they met some guidelines (good grades, probably a part-time job).
Yes perhaps economic backgrounds tend to skew things and maybe I’m heartless when it comes to money but at the end of the day, I view that 529 still as “me and my wife’s” money. If I am paying my kid to go to college, there are certain job requirements (like any job you’re paid for the quality of work) which I don’t find unreasonable:

1) pick a marketable major. I am not going to force a major on them but the major they pick should have good career prospects

2) maintain b average gpa for one semester and that semester’s tuition is paid. Otherwise they would have to pay me back for that semester’s tuition.

If I had that offer growing up, I would have jumped on it immediately. Perhaps others have much more favorable and nurturing households :happy
Last edited by bubbly on Wed Oct 13, 2021 4:37 pm, edited 1 time in total.
Isabelle77
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Re: Telling Kids about 529 plans

Post by Isabelle77 »

I’ve never really understood the “skin the game” argument. Kids don’t suddenly become slackers because they don’t have to pay for their college costs. If you’ve raised them to be responsible and grateful with money, they’ll do just fine. That process begins when they’re very young.

My parents, who completely paid for all 3 of their children to go to college, told us that we could go to the best college we could get into but that we were expected to get jobs after graduation (in 4 years) and support ourselves. Grad school was not included. We all went to excellent schools and are successful adults.

We will tell our children something similar.
fyre4ce
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Re: Telling Kids about 529 plans

Post by fyre4ce »

silvergga wrote: Wed Oct 13, 2021 10:48 am Kids are really smart today. When my girl was 7-8 years old, "Daddy, is college expensive?"

"Yes, honey."

Then she asked, "Have you started saving for it yet?"

She grasped the concept of savings early on!
Wow! A round of applause for her and her parents!
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Kenkat
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Re: Telling Kids about 529 plans

Post by Kenkat »

We told our kids we’d pay for four years at State U. We didn’t tell them whether that money would come from 529 plans, our pockets, loans, etc. They always worked hard in school because that was the expectation we set early on. We evaluated effort more than results - are you doing your homework, turning in assignments on time, going to and paying attention in class. While we didn’t have a GPA requirement, it was clear to them that we are not paying for them to go to school to party or slack off. Are you allowed to do a little of that as long as the grades and effort are there? Sure, but if the effort isn’t there, neither is the money next semester or next year.

We never really had any issues with them, they worked hard (enough) and both graduated with solid grades.
Normchad
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Re: Telling Kids about 529 plans

Post by Normchad »

Isabelle77 wrote: Wed Oct 13, 2021 4:26 pm I’ve never really understood the “skin the game” argument. Kids don’t suddenly become slackers because they don’t have to pay for their college costs. If you’ve raised them to be responsible and grateful with money, they’ll do just fine. That process begins when they’re very young.

My parents, who completely paid for all 3 of their children to go to college, told us that we could go to the best college we could get into but that we were expected to get jobs after graduation (in 4 years) and support ourselves. Grad school was not included. We all went to excellent schools and are successful adults.

We will tell our children something similar.
I think that’s completely appropriate. I also don’t agree with the “skin in the game” argument. It works for a lot of other families though, so that’s fine too.
secondcor521
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Re: Telling Kids about 529 plans

Post by secondcor521 »

Regardless of what sort of arrangement a parent has with regards to how much they choose to pay towards their kid's college education, I think it's good to communicate regularly, gradually and progressively, and at a level of detail and sophistication appropriate to the kids' age and ability to understand.

I think it's rarely a good idea to "protect" them by withholding information. I always had a policy of answering all my kids' questions on any topic honestly (although at their level of understanding, naturally).

So when your kids are little, explain that college can be a great place to learn about the world and help them get a good start on a career in certain fields. Some people go to college, some people work, some people go to trade school, some people serve in the military or volunteer organizations.

Then at some point explain that college degrees take about four years, that you have to apply and not everyone gets accepted, that they cost money the amount of which varies, and that there are scholarships and sometimes grants.

Then there are tax-advantaged ways of saving for college, and we've put enough money aside to pay for X but you're paying for Y depending on Z.

Then when they're starting the application process, it is probably good to say things like "School X is a stretch, School Y there's probably money left over" so the kid can include that in the decision process of which schools to apply to and ultimately which one to choose.

My parents always somehow had the unspoken explanation that if I were a total screw up, then they could find something else to do with my college fund. They never had hard and fast GPA requirements, but there were still expectations. Up to you, but them knowing that there is a $100K 529 with their name on it is not the same as them knowing that they have $100K to spend as they please.

I have three kids - one a recent college graduate, and two college sophomores. I would say, based on my experience:

1. Whether they are a hard worker or lazy depends on their innate nature and their overall parenting in all areas much more than whether or not they know about a 529 and possibly it's exact balance in dollars and cents. Whether they have household chores and are expected to have good character in sports, and you watch to make sure their friends are good kids, and maybe they have summer jobs when they're teenagers, that's all going to impact it more than "Hey, you have $100K in a 529 account"

2. They are all different, and while I have a generic "college deal" that they all know and I generally follow, I do make various adjustments based on their individual situations and personalities. One of mine may have needed the "GPA or you're getting cut off" speech, and I was nearly there, but I figured out it would have backfired with this particular kid. I'm thankful I applied judgment and patience and a bit more leniency as he seems to have matured out of the issue. Too early to claim victory and YMMV, of course.

3. The same communication question is also happening for me with regards to inheritances. I'm following the same general approach on that topic.
Wannaretireearly
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Re: Telling Kids about 529 plans

Post by Wannaretireearly »

sureshoe wrote: Wed Oct 13, 2021 11:29 am I literally just yesterday mentioned this to my 11 year old. I don't see a point in going super-deep into your finances with kids who really don't grasp the difference between $1k, $100k, and $1M.

We were talking sports and academic scholarships, and I mentioned we have a lot of money saved for college, and if he can get a scholarship, I'd use that money to buy him a house or set up an account or whatnot.

In general, about this age I think it makes sense to introduce this, because grades and standardized tests are starting to matter.
This. They would not grasp having 6 figures allocated to college in their name. But, it would become playground discussion...not productive. I do say stuff like if you get from $1k to $1.5k by doing extra jobs (their bday money etc in checking account), I'll help double that for College & introduce them to a fund (& compound interest & risk). Neither has shown much interest....yet.
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techiegirl
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Re: Telling Kids about 529 plans

Post by techiegirl »

I did not tell my kid how much was in her 529 plan until she was applying for college and then when she was considering from the list of accepted schools. We went through how much she had in her 529, how much each college offered her in scholarships, and what her net cost would be for each school. By then, she was old enough (and mature enough) to analyze the pro’s and con’s of each school and how much it’ll end up costing her.
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Tamarind
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Re: Telling Kids about 529 plans

Post by Tamarind »

I suggest you focus for the next 10-12 years on teaching the kids to budget and be frugal. Give them increasing amounts of control over necessary spending on themselves (clothes, food, school supplies) and give them opportunities to do things their own way and mess up while the stakes are low.

When they start seriously thinking about college, I'd introduce 2 ideas:

1) As long as they pick a school that is not exorbitant in price, thanks to careful saving they won't need loans.

2) If they are more frugal, they can keep the extra money after. For grad school, or even for other things (w penalty).

Point 2 above is really powerful motivation if kids have learned the value of money. This is a way to give them a reason to be choosey without saddling them with unnecessary debt.

My folks told me they had saved enough (taxable) for room and board at State Flagship, and if I got scholarships or found a cheaper school they would gift me the difference. If I wanted to spend more I would have to get loans. You bet I found scholarships and left school with more money than I started with. It definitely helped me not have to move home or ask parents for money when the Great Recession started right after I graduated. Good investment in my independence and one I would make in my own child.
dropdx
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Re: Telling Kids about 529 plans

Post by dropdx »

I'd probably only let them know if they pass pre-school
dboeger1
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Re: Telling Kids about 529 plans

Post by dboeger1 »

This issue is perhaps very particular to my family, but I think such information can affect kids in very different ways. I was always the "good student" growing up, and my parents told me from a fairly early age that they would fund my education. Well, unforeseen events happened and resulted in us being poor by the time I went to university, but thankfully, my whole education was paid for by scholarships and other need-based aid. Although there were probably risks to me assuming that my education would ultimately be paid for, I would say in my case, it all worked out, and my effort and interest in studies was never really contingent on any financial aspect of it. The way I saw it, being told I would be covered gave me more security to pursue my academic goals.

With my brother, things didn't go as smoothly. He had dreamed of going into ROTC and subsequently the military since he was little. He was (and still is) hyper competitive in spirit, although he's the type who is more motivated by the reward and doesn't necessarily want to put in the work for its own sake. It was obvious that because my education was fully paid for, he felt it was only fair that his would be too, and he even expressed multiple times with cynicism throughout high school that there would be no point to him trying if someone didn't fund his education. He hated the idea of having to take out loans that he would need to pay back. Thankfully, he did get his grades up and got accepted into a good ROTC school on a full ride military scholarship. Things were going really well for him and he was on track to fulfill all his dreams and achieve a similar level of success to mine, but he developed a partying habit, got in with the wrong crowds, and ended up getting kicked out of his program following a DUI. As a result, what would have been a full ride with some minor service contingencies turned into a pile of debt with no degree or job to show for it. Unfortunately, his life has really only spiraled further out of control since then. He constantly lashes out at the world as if he was robbed of his opportunity, even though he did it to himself. He resents the fact that he didn't have stronger financial guarantees, to the point that he has no plan for repaying the debt and prefers to blow his low service wages on short-term thrills and toys he can't really afford. In his case, I think the mere possibility of others paying for his education was mental poison, and while he may have fallen on hard times regardless, I think he might have been better off under the assumption that he would have to pay his own way through skill, in order for him to have skin in the game. Of course, knowing that I didn't made that unacceptable in his mind.

Meanwhile, my sister was not the least bit interested in academics, had no aspirations for a degree of any kind, and wanted to pursue a singing career. Of course, that's somewhat of a pipe dream, especially the way she imagines it, but I think we all underestimated just how powerful the allure was for her. My father agreed to pay for her local community college courses while she decided what to do, and she quit after a year, not even receiving her associate's degree. Since then, she has actually made some slight progress on a legitimate music career, albeit not enough to sustain her without a proper day job. In her case, I don't think money really influenced her either way. Had she been given no money for education, I think she'd be in about the same position she is now, working clerical jobs at banks and schools while pursuing music on the side. Being given the money for some classes at the very least gave her some exposure and assured her that just wasn't the path she was interested in.

Kids are just very different. I would take whatever anyone says about their personal experiences with a grain of salt. I grew up with 2 siblings who were very different than me when it came to academics, and I'm sure there are all kinds of other variations of young students as well, ranging from troublemakers to child prodigies. Give yourself time to figure out what your children's specific needs are, and be very cautious when it comes to leaking information intended for one to the others, as they can take things completely differently and develop feelings of envy and resentment.
stoptothink
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Re: Telling Kids about 529 plans

Post by stoptothink »

Normchad wrote: Wed Oct 13, 2021 4:37 pm
Isabelle77 wrote: Wed Oct 13, 2021 4:26 pm I’ve never really understood the “skin the game” argument. Kids don’t suddenly become slackers because they don’t have to pay for their college costs. If you’ve raised them to be responsible and grateful with money, they’ll do just fine. That process begins when they’re very young.

My parents, who completely paid for all 3 of their children to go to college, told us that we could go to the best college we could get into but that we were expected to get jobs after graduation (in 4 years) and support ourselves. Grad school was not included. We all went to excellent schools and are successful adults.

We will tell our children something similar.
I think that’s completely appropriate. I also don’t agree with the “skin in the game” argument. It works for a lot of other families though, so that’s fine too.
It's like anything else, it works for some people and it makes no sense for others. For my wife, she absolutely had to have "skin in the game" for her to succeed in school. She had a full-ride scholarship her first go-round and she was failing out before she eventually dropped out without even finishing her second semester. It wasn't until she went back almost a decade later, having to work full-time to pay for it, that she took it seriously. Certainly life kicking her in the face and another 7yrs of maturity played a factor as well. It's kind of all over the map within both of our families; it appears to have been beneficial for some, but maybe not for others. But, we didn't have a choice, financial help wasn't an option. Interestingly enough, the one person in my family who harbors some resentment over it (growing up poor, not having financial help) is my sister, who had her Ivy undergrad covered completely and used it for a degree that had no relevance to a career-track.

Looking at my kids, I don't think it is necessary for my son; it's already clear at 6 that he is very self-driven. I don't think telling him now that college is paid for will have any negative side effects. My daughter is a different story and we'll have to figure that one out.
bradinsky
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Re: Telling Kids about 529 plans

Post by bradinsky »

Way to early to involve them in any kind of financial discussions. In a few years, start with an allowance & teach them about saving. Encourage them with regards to their schoolwork. When they’re about ready to begin high school, conversations about college finances can begin.
remomnyc
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Re: Telling Kids about 529 plans

Post by remomnyc »

I told them when they started high school that we had saved enough for four years at any private university, but it could only be used on a top 50 school. If they were to choose private, I told them I expected them to take the max federal loan (their skin in the game), which we would repay upon graduation if they maintained a B average. If they chose to go to a public university, the balance would be theirs after graduation and two years off the parent payroll. Oldest chose private but already has plans to attend grad school for free. He asked last weekend if he could take a part-time job for spending money. I told him I plan to give him spending money once his summer money is gone, but he doesn't want it because he says he would feel guilty spending it on frivolous things. We agreed that he could work one day a week next semester if his grades are good enough. Youngest is already planning on public and using the balance to buy real estate.
Broken Man 1999
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Re: Telling Kids about 529 plans

Post by Broken Man 1999 »

We used pre-paid tuition plans for the daughters, I bought the oldest daughter's plan outright, and started making payments on the plans for the two younger daughters. I purchased all plans the first year offered by the State of Florida.

The daughters knew they had the plans from the start, and were told their college expenses would be paid in total if they attended a public university in Florida. If they chose to go out of state, or private, we would do the best we could, but even better would be for them to earn a scholarship. Two went to USF, one went to a private university in Florida with a tuition scholarship. No debt for any, but that was in the late 1990ties and early 2000s. College expenses hadn't exploded at the time.

I did my best to drill into their heads to follow this order:
1. Earn their college degree.
2. Get married if that is what they desired.
3. Have children if that was what they desired.

DW and I got married, had children, then earned college degrees. Tougher route to travel.

And, perhaps most important of all, I wanted them to be able to support themselves and not have to depend on someone else. The best way to be able to support themselves was through education.

Much to my surprise, they listened. :D

Broken Man 1999
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Nowizard
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Re: Telling Kids about 529 plans

Post by Nowizard »

Our approach from the financial side was to tell our children that we would cover college and that any amount they earned in scholarships would be theirs upon graduation or for semesters they completed successfully. Rather than "skin in the game," we believed that performance receives award. We were fortunate enough to be able to fund college, and they were very pleased to graduate with assets related to their "work."

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Juice3
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Re: Telling Kids about 529 plans

Post by Juice3 »

tenkuky wrote: Wed Oct 13, 2021 10:27 am They are aware that there is zero need-aid coming.
tenkuky wrote: Wed Oct 13, 2021 10:27 am Thus far, haven't disclosed to teen that the 529 exists or the amount therein.
I guess this all depends on how you define the needy and the provider. Sounds to me like there is aid ready and waiting.
bltn
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Re: Telling Kids about 529 plans

Post by bltn »

KingRiggs wrote: Wed Oct 13, 2021 10:05 am I just told them that if they held up their part of the bargain (working hard in school, staying out of trouble), I would hold up my part (trying to get them debt-free through their education).

A corollary to that was that they were getting their inheritance in the form of an education, and that anything left to them after I had fun in retirement would be gravy...
Their education was possibly the best inheritance you could leave them. My wife and I felt the same way about our kids.

My parents were a role model for me in this regard. As a middle class, single income family, their primary savings goal until my father was in his mid 50 s was to save enough for their childrens’ college education. They sent me and my sister to an elite private university, which was expensive. Then my father worked until age 75 before retiring. I m very grateful.
Dagwood
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Re: Telling Kids about 529 plans

Post by Dagwood »

At an appropriate age, yes. As part of a larger discussion of setting expectations regarding the seriousness with which they treat their schoolwork.

Neither my wife nor I had any assistance with college or law school. The process of working while we were in school and keeping our grades in order taught us invaluable lessons in time and money management. The process of borrowing and paying off school loans also instilled important life lessons about budgeting and how great it is to be free from debt. It also gave us an appreciation of the cost and value of our respective educations. In that respect, I would echo and agree with stoptothink's comments above. My sense is that too many people want to make sure that their kids have a stress free existence, and in so doing, they cripple them, in terms of their ability to manage things themselves.

That being said, we have saved for our kids education. The mindset behind doing this was simply that we were in a position to do so, so we thought it would be prudent to have savings for education. That being said, we are not in the mindset that we have to save thousands of dollars a month for 20 years so that the kids have no responsibility or burden for their education. Rather, the concern was that we likely would not qualify for any financial aid, and with the huge increases in tuition at all these schools, we wanted to keep the kids from being buried in debt. Some debt is probably good if they are placed in a good career with a respectable income because it will teach them money management skills, but excessive debt is obviously not good. Part of the equation, particularly if you are not going to get into an ultra top tier school for whatever reason, and if you plan on pursuing a post graduate degree, is to go where they pay. Paying full price at most of these schools is akin to paying full price for a Joseph A Banks suit. (Remember those pre-pandemic ads before we all stopped going into the office -- "3 suits, 4 shirts, a tie and a dress shirt for $399"). Keep your proverbial powder dry for the degree in your profession as that will be the one that opens doors.

But to go back to the poster's original question with all that as background, our mindset, as explained above, gives a sense of why we would have the conversation with the kids about their 529 accounts, in terms of setting expectations for how such a gift can be appropriately used.
KlangFool
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Re: Telling Kids about 529 plans

Post by KlangFool »

OP,

I told my kids that I would pay for college education if I am financially independent. If not, they are on their own.I had unemployed for more that 1 year a few times. I have no idea when and if I would be permanently unemployed or under-employed in my 40s and 50s like many of my peers.

They saved for their own college education. They have about 20K worth of saving when they started college. They were lucky that I could pay for their college education and they do not have to use their own savings.

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getthatmarshmallow
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Re: Telling Kids about 529 plans

Post by getthatmarshmallow »

I will tell them when they're starting to think about college.

I give my regular reminder that the main reason students drop out is lack of money to continue, and that there are plenty of people with 'skin in the game' who just don't graduate at all or who take a decade to finish. Do as you like, but I'm skeptical that making your kid work to pay for a quarter of their college education is going to make them do better in school.
stoptothink
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Re: Telling Kids about 529 plans

Post by stoptothink »

Dagwood wrote: Thu Oct 14, 2021 8:36 am At an appropriate age, yes. As part of a larger discussion of setting expectations regarding the seriousness with which they treat their schoolwork.

Neither my wife nor I had any assistance with college or law school. The process of working while we were in school and keeping our grades in order taught us invaluable lessons in time and money management. The process of borrowing and paying off school loans also instilled important life lessons about budgeting and how great it is to be free from debt. It also gave us an appreciation of the cost and value of our respective educations. In that respect, I would echo and agree with stoptothink's comments above. My sense is that too many people want to make sure that their kids have a stress free existence, and in so doing, they cripple them, in terms of their ability to manage things themselves.

That being said, we have saved for our kids education. The mindset behind doing this was simply that we were in a position to do so, so we thought it would be prudent to have savings for education. That being said, we are not in the mindset that we have to save thousands of dollars a month for 20 years so that the kids have no responsibility or burden for their education. Rather, the concern was that we likely would not qualify for any financial aid, and with the huge increases in tuition at all these schools, we wanted to keep the kids from being buried in debt. Some debt is probably good if they are placed in a good career with a respectable income because it will teach them money management skills, but excessive debt is obviously not good. Part of the equation, particularly if you are not going to get into an ultra top tier school for whatever reason, and if you plan on pursuing a post graduate degree, is to go where they pay. Paying full price at most of these schools is akin to paying full price for a Joseph A Banks suit. (Remember those pre-pandemic ads before we all stopped going into the office -- "3 suits, 4 shirts, a tie and a dress shirt for $399"). Keep your proverbial powder dry for the degree in your profession as that will be the one that opens doors.

But to go back to the poster's original question with all that as background, our mindset, as explained above, gives a sense of why we would have the conversation with the kids about their 529 accounts, in terms of setting expectations for how such a gift can be appropriately used.
Couldn't agree more and we have followed a similar path - we started 529s when our financial house was in order and we were in a solid position to do so. Sounds kind of odd, but having both grown up in poverty, the biggest parenting challenge for wife and I has been manufacturing hardship. Our kids will simply never face the same challenges as we did and therefore not have the same opportunity to find out who they are and grow. This is why we our kids compete in combat sports (BJJ, muy thai, wrestling), especially my daughter who inherently has little interest in pushing herself (but has learned to love it as she gets better). Now, I am not saying that "skin in the game" works or is necessary for everybody or that the challenges we faced as kids resulted in all positives (they absolutely did not), but we definitely side towards the Mike Rowe/Jocko/Angela Duckworth mindset (hormetic effect) that a little stress (not too much) and in the right ways makes us stronger and more resilient.
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Watty
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Re: Telling Kids about 529 plans

Post by Watty »

Admiral wrote: Wed Oct 13, 2021 10:22 am
bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

I agree with the other posters. No need to have that conversation until college apps are on the horizon. Earliest I would think this is reasonable would be midway through high school.
Sorry, but I think this is terrible advice. (Unsure if you are advocating this.) So, if the kids gets a 2.9 it's no money for you pal, you're on your own?

I would never attach paying for education to a GPA. Plenty of kids work as hard as they can and don't achieve some random level of grades set by... whomever.
I agree that is bad advice.

We like to think that we live in Lake Wobegon where all the kids are above average but there is a good chance that your kid is not above average.

My son was never a good student in high school or college and it took LOTS of extra TCL to get him through college. In particular he had a real hard time getting through the higher level math classes that were required for a Computer Science degree. If he had additional financial pressure I am pretty sure that he would have given up and never graduated.

After he graduated and started working in the "real world" he has thrived and is doing great in his career and is on track to get into management.

The state I am in has a Hope Scholarship where if your graduate with a 3.0 GPA from high school and keep a 3.0 at a state university then your college tuition will be pay. He had the Hope Scholarship going into college but his GPA dropped and he lost it. He was really discourage when that happened. If we had not been willing and able to pay his tuition, without making a big deal about it, then it is likely that he would have dropped out of college instead of taking on student loans.

A top student will likely do well if you can help them financially or not. With a struggling student the financial aid may very well make the difference between success and failure.

Our financial help was not unconditional if he just partied too much but we are glad that we were able to help him out when he was struggling.
flyfishers83
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Re: Telling Kids about 529 plans

Post by flyfishers83 »

It's interesting to read all of the different perspectives.

My parents and I talked about it a bit in high school, eventually settling on they would pay for undergrad without any real discussion of where that money was coming from. As it relates to "skin in the game" comments-I ended up with a fair bit of scholarship money. New deal was parents bought me a car, but me not having to pay them back was conditioned on me maintaining scholarship eligibility through school (it was close one semester, as I wasn't a fan of a 5 credit hours honors econ class that started at 8). Ended up graduating early, and took out loans for my JD.

My sister bounced around a couple of schools and never earned a degree. I believe there is still money in an account, in case she ever goes back.

Wife and I started 529s this year. Our oldest is 2. Hard to imagine having the discussion about college.
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eye.surgeon
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Re: Telling Kids about 529 plans

Post by eye.surgeon »

jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
My parents funded my education right through medical school and I do the same for my kids. I never felt a lack of skin in the game and my kids never failed to perform. I don't think paying for education creates lazy kids. It doesn't cure lazy kids either.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett
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Vulcan
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Re: Telling Kids about 529 plans

Post by Vulcan »

eye.surgeon wrote: Thu Oct 14, 2021 10:04 am I don't think paying for education creates lazy kids. It doesn't cure lazy kids either.
Well put, eye.surgeon :beer
If you torture the data long enough, it will confess to anything. ~Ronald Coase
Wannaretireearly
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Re: Telling Kids about 529 plans

Post by Wannaretireearly »

techiegirl wrote: Wed Oct 13, 2021 8:39 pm I did not tell my kid how much was in her 529 plan until she was applying for college and then when she was considering from the list of accepted schools. We went through how much she had in her 529, how much each college offered her in scholarships, and what her net cost would be for each school. By then, she was old enough (and mature enough) to analyze the pro’s and con’s of each school and how much it’ll end up costing her.
I really like this approach.
Death and taxes. Only one is under your control!
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Re: Telling Kids about 529 plans

Post by cshell2 »

I think of the 529 as my money that I was setting aside to help pay for college and never really felt the need to tell them how much was in the accounts. Both my kids also have UTMAs that their grandfather opened for them. This IS their money no matter what, but even that we haven't thrown out anything but vague numbers to them as far as what's in there.

When my oldest was young, he just knew that there was savings and that education of some kind beyond high school was an expectation. I also let him know that I would be able to swing tuition/fees and books at state school rates, if he chose to live at home and commute to one of the three colleges nearby he would be able to do it debt free. Live away, or attend an out of state or private school? Not so sure. But he always had the commute option in his back pocket.

By the time he became a Junior and we started visiting colleges I was able to nail down more of a solid, "You have a max of X dollars a year" and by running the Net Price Calculators on the school's websites to get an idea of financial aid we knew he could go away and not have to commute. He landed a few scholarships to boot. So, when he was picking schools, I told him the deal was, anything not covered by financial aid and scholarships we would split 50/50 between the 529 and the UTMA. Pick a school that was too expensive, then you would need to take loans to cover the gap, pick an inexpensive option anything left in the UTMA is yours at graduation. The excess 529 would roll to his brother. He didn't choose the least expensive option of his acceptances, but close. It was smack dab in the middle costwise in his top 3 picks. I don't think cost was the primary driver of his decision though.
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Re: Telling Kids about 529 plans

Post by tnr »

techiegirl wrote: Wed Oct 13, 2021 8:39 pm I did not tell my kid how much was in her 529 plan until she was applying for college and then when she was considering from the list of accepted schools. We went through how much she had in her 529, how much each college offered her in scholarships, and what her net cost would be for each school. By then, she was old enough (and mature enough) to analyze the pro’s and con’s of each school and how much it’ll end up costing her.
This is our plan as well. She has just completed her initial college applications. Next step is to see what schools she gets into and what is offered re financial aid. We did tell her there was enough in her 529 that she should not be concerned about the cost of any school in deciding who to apply to. That is not strictly true as the most expensive private schools’ full tuition for 4 years would be higher than what is in her current 529 account.
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Re: Telling Kids about 529 plans

Post by forgeblast »

I started telling my daughter as soon as we started saving for her 529 that we would have money for her to go to college. As my wife and I are both teachers, we also made sure to tell her she was not going into education. She asked what happens if I do I said you cousin gets your 529 and you have to take out loans. We will not pay for that degree.
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Re: Telling Kids about 529 plans

Post by stoptothink »

forgeblast wrote: Thu Oct 14, 2021 1:30 pm I started telling my daughter as soon as we started saving for her 529 that we would have money for her to go to college. As my wife and I are both teachers, we also made sure to tell her she was not going into education. She asked what happens if I do I said you cousin gets your 529 and you have to take out loans. We will not pay for that degree.
Why? Teaching certainly is not one of the higher-paying professions for college grads, but it tends to pay median income salaries and has many other benefits. For some it truly is "a calling", it definitely is for my step-father and maybe my sister as well (she's still early in her career). I guess this is common with people of all professionals, as we are seeing multiple MDs saying they tell their children not to get into medicine. As an exercise physiologist and health scientist, I guess I should council my children to study something else because the data suggests there is little opportunity, even though it has worked out quite well for me.
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Re: Telling Kids about 529 plans

Post by Vulcan »

tnr wrote: Thu Oct 14, 2021 1:21 pm We did tell her there was enough in her 529 that she should not be concerned about the cost of any school in deciding who to apply to. That is not strictly true as the most expensive private schools’ full tuition for 4 years would be higher than what is in her current 529 account.
So what is your plan if she gets into that most expensive school?
If you torture the data long enough, it will confess to anything. ~Ronald Coase
tnr
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Re: Telling Kids about 529 plans

Post by tnr »

Vulcan wrote: Thu Oct 14, 2021 4:23 pm
tnr wrote: Thu Oct 14, 2021 1:21 pm We did tell her there was enough in her 529 that she should not be concerned about the cost of any school in deciding who to apply to. That is not strictly true as the most expensive private schools’ full tuition for 4 years would be higher than what is in her current 529 account.
So what is your plan if she gets into that most expensive school?
The most expensive isn’t her first choice. We’d have enough for 3 years and would probably dip into her younger sisters’ 529 for a fourth year. Then, replenish younger sisters’ 529 at a later time.
retired recently
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Re: Telling Kids about 529 plans

Post by retired recently »

I did not read the entire thread so apologies if I repeat.

We never told our son anything about our finances but said that we would pay for whichever college he chose to attend as long as he could explain what he felt the benefits the college of his choice had over the in-state option and then tell us how he intended to make use of it. I also told him he could choose his major but I advised him to pick one that would help him gain employment as we would not fund him forever.

He did not get accepted into his top school but did get into two Ivy League schools and a few other top schools. Ultimately he went with a school that cost about twice the cost of instate but we all felt comfortable with his choice. We were fully willing to pay the more expensive options but admittedly glad he did not argue for them.

We never felt a need to tell him specifics although he was aware that he had a 529, etc.
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Re: Telling Kids about 529 plans

Post by Michael Patrick »

I'm a lowly civil servant, and my wife works part-time for a non-profit social service agency. We never had large sums to save towards college. I opened a 529 for my daughter shortly after she was born, and contributed small amounts monthly without fail. As our income grew I increased the amount I contributed each month. The balance in her account on the day she graduated high school was around $65k.

I don't know that I ever told my daughter the exact amount we had saved, but she did know we were contributing to a 529 for her. I told her that whatever the balance was when she started college was what we would contribute to her education, and the rest she would have to take loans.

We toured three schools - a small private college ($45k/yr), a large out-of-state Big Ten state school ($40k/yr non-resident), and a smaller Wisconsin state university campus ($15k/yr). I told her she could go to one of the first two schools, but she'd burn through the 529 in under two years and be on the hook for the rest. She wisely chose the smaller in-state school, where she can graduate without debt and have some some money left over to put towards a masters degree.
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Re: Telling Kids about 529 plans

Post by Scotttheking »

My kids are still little, but I don’t see why I would specifically. What they need to know is what wife and I will pay for college, and we’ll manage the sources to optimize that.
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Re: Telling Kids about 529 plans

Post by Nastywarnob »

We count ourselves fortunate in that the grandparents wanted to start contributing when our second child was born…which forced us to start when the kids were very young (I’m not sure if we would have had the grandparents not wanted to start - we had a lot of more immediate expenses but were “guilted” into starting right then). At that point, I calculated projected state tuition costs for both our kids and set a target funding plan to get there. Having others onboard lessened the load on us alone. Besides, THEY FORCED US TO START WHICH WAS THE REAL WIN!

Our plan was communicated to the kids while they were in middle school that they would have a 4 year tuition/books/room/board funded at the average MN state tuition. If they wanted to go out of state or private, they would be accountable for the rest. If they obtained scholarships or other offsets, the remainder would still be theirs to keep at graduation. Why then? Because that was the time they would have to make some decisions around positioning their class planning to be able to take college classes at the high school if they were so inclined.

The result? Both realized they had skin in the game. They have maintained extremely high grade point averages and have been enabled to make interesting thoughtful decisions regarding their college plans.

1. My daughter’s thoughts (a high school sophomore this year) have always revolved around going away to school. She was able to make decisions in middle school to take some high school courses early which in turn freed her up to start taking college classes in high school a year earlier than normal. Her plan is to obtain (or get close to obtaining) a two-year degree prior to high school graduation. This gives her greater flexibility to attend an outstate institution or pursue post grad with the allocated financial funds available. She freely admits to herself that her tastes run a little too fine (although not way over the top) such that income is going to be a factor for her, and she is planning accordingly.

2. My son’s thoughts were that he was always inclined to stay in-state, with a targeted degree that was supported by a fairly strong state school program.
He made a deliberate decision to not accelerate his high school educational pursuits, has never had an appetite to take any of the college classes available at the high school. HOWEVER….he has had a job and contributed heavily to a Roth IRA account both years, has really gotten onboard with personal finance, has never really exhibited acquisition disorder, and therefore is strongly positioned to be happy at almost whatever income he ends up earning.

It’s been interesting watching them develop financial planning and objective assessment skills through this process. Hard to believe that we are at this point from when we put the first dollars in the education accounts back when the kids were so young. Time flies.
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Re: Telling Kids about 529 plans

Post by DarthSage »

Obviously, it's too early to discuss this with your kids. But, it's not too early to start sharing your values and your choices with them.

If they see you read, they'll grasp that reading is important and fun.

If they see you saving money for X (say, a nice vacation) by doing Y (maybe cooking at home versus eating out), they will absorb those lessons, too.

My younger two are now teens, but, starting from very young, we talked about family values--in our house, a high premium is placed on education and travel. My kids have trusts from their late grandmother--we knew about these, so I knew I had to prepare. Now that they're old enough, we show them their quarterly balances. They love to see how much money they earned for doing nothing. I think this is a really valuable lesson--by leaving their money alone, it grows for them. It can be a tough concept for kids to grasp.

We emphasize that they have this gift, due to the diligent work and saving of their grandparents. It's special and needs to be used for something that honors their grandparents. The only one who has touched any money is my oldest (age 26), who took some to pay for grad school. We have nieces who used theirs for house down payments--again, an appropriate choice.

As for college, we will pay, but up to a limit. DD18 went to a state school, because she wants law school, and our budget couldn't stretch for the pricey private college. She's in the honors college, having a blast, and even got a small merit scholarship for going local. We expect our kids to kick in for books and incidentals. We haven't seen any problems with lack of motivation. Both of our current college kids have jobs, and the youngest (age 15) is looking forward to getting a "real" job (versus lawnmowing).

The good news for you, OP, is that you have time, and it's not a one-time conversation. Walk the talk, the kids will follow.
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Re: Telling Kids about 529 plans

Post by Normchad »

DarthSage wrote: Fri Oct 15, 2021 7:03 am Obviously, it's too early to discuss this with your kids. But, it's not too early to start sharing your values and your choices with them.

If they see you read, they'll grasp that reading is important and fun.

If they see you saving money for X (say, a nice vacation) by doing Y (maybe cooking at home versus eating out), they will absorb those lessons, too.

My younger two are now teens, but, starting from very young, we talked about family values--in our house, a high premium is placed on education and travel. My kids have trusts from their late grandmother--we knew about these, so I knew I had to prepare. Now that they're old enough, we show them their quarterly balances. They love to see how much money they earned for doing nothing. I think this is a really valuable lesson--by leaving their money alone, it grows for them. It can be a tough concept for kids to grasp.

We emphasize that they have this gift, due to the diligent work and saving of their grandparents. It's special and needs to be used for something that honors their grandparents. The only one who has touched any money is my oldest (age 26), who took some to pay for grad school. We have nieces who used theirs for house down payments--again, an appropriate choice.

As for college, we will pay, but up to a limit. DD18 went to a state school, because she wants law school, and our budget couldn't stretch for the pricey private college. She's in the honors college, having a blast, and even got a small merit scholarship for going local. We expect our kids to kick in for books and incidentals. We haven't seen any problems with lack of motivation. Both of our current college kids have jobs, and the youngest (age 15) is looking forward to getting a "real" job (versus lawnmowing).

The good news for you, OP, is that you have time, and it's not a one-time conversation. Walk the talk, the kids will follow.
This is a terrific post. A lot more to raising kids than just how much $$$ you can or can’t afford for schooling.
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Re: Telling Kids about 529 plans

Post by Leemiller »

Did some of you forget what’s it like to be young? I would have tried harder if I knew my college costs would be covered. As things stood, I always had to compromise where I could get it with cost and it was extremely stressful. My elementary school kid already knows if she gets into a great school, it’s covered.
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Re: Telling Kids about 529 plans

Post by Orangutan »

Leemiller wrote: Fri Oct 15, 2021 8:05 am Did some of you forget what’s it like to be young? I would have tried harder if I knew my college costs would be covered. As things stood, I always had to compromise where I could get it with cost and it was extremely stressful. My elementary school kid already knows if she gets into a great school, it’s covered.
Or they might slack off if they know.
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Re: Telling Kids about 529 plans

Post by jstage »

forgeblast wrote: Thu Oct 14, 2021 1:30 pm I started telling my daughter as soon as we started saving for her 529 that we would have money for her to go to college. As my wife and I are both teachers, we also made sure to tell her she was not going into education. She asked what happens if I do I said you cousin gets your 529 and you have to take out loans. We will not pay for that degree.
This is particularly interesting bc my husband and I are both educators and we also don't want our children to be teachers. Stagnant salaries, terrible work hours/conditions, and the top salaries (even for admin) don't come anywhere close to other careers.
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Re: Telling Kids about 529 plans

Post by cshell2 »

Leemiller wrote: Fri Oct 15, 2021 8:05 am Did some of you forget what’s it like to be young? I would have tried harder if I knew my college costs would be covered. As things stood, I always had to compromise where I could get it with cost and it was extremely stressful. My elementary school kid already knows if she gets into a great school, it’s covered.
If you can afford to make that promise, go ahead and tell them that. I could not and did not, but my kid still worked his tail off and did very well in high school.
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Re: Telling Kids about 529 plans

Post by ClevrChico »

Your kids are lucky. Be as transparent as possible. I tell my kids that we save X amount into their 529's, and it's up to them to make the most of it. (I make no promises beyond this.)

This has not impacted their motivation or success in school yet.
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Re: Telling Kids about 529 plans

Post by forgeblast »

stoptothink wrote: Thu Oct 14, 2021 2:56 pm
forgeblast wrote: Thu Oct 14, 2021 1:30 pm I started telling my daughter as soon as we started saving for her 529 that we would have money for her to go to college. As my wife and I are both teachers, we also made sure to tell her she was not going into education. She asked what happens if I do I said you cousin gets your 529 and you have to take out loans. We will not pay for that degree.
Why? Teaching certainly is not one of the higher-paying professions for college grads, but it tends to pay median income salaries and has many other benefits. For some it truly is "a calling", it definitely is for my step-father and maybe my sister as well (she's still early in her career). I guess this is common with people of all professionals, as we are seeing multiple MDs saying they tell their children not to get into medicine. As an exercise physiologist and health scientist, I guess I should council my children to study something else because the data suggests there is little opportunity, even though it has worked out quite well for me.
The amount of education required for keeping the degree/teaching license puts teachers at a huge disadvantage when it comes it comparable education and salary's. The amount of behavioral issues coming to schools and the fact that we do more and more and more for the community that looks at us a glorified baby sitters is frustrating on so many levels.
Pa no long as a guaranteed defined pension for new hires. Medical is not paid for by the district, and we have high deductibles. The one saving grace was the retirement and they took that away for new hires. We have had teachers quit mid year, because they are fed up and can make more outside of education.
We are seeing that very few college grads are going into education so there are no subs. This translates to no break because you need to cover other classes on a daily basis.
The buildings are outdated with very little ventilation, it was 87 in my room in August and the humidity was so bad no posters would stay on the walls. I could go on an on, I am teaching 22 years and every year more gets dumped on us from a local and state level.
Wellfleet
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Re: Telling Kids about 529 plans

Post by Wellfleet »

jstage wrote: Fri Oct 15, 2021 8:10 am
forgeblast wrote: Thu Oct 14, 2021 1:30 pm I started telling my daughter as soon as we started saving for her 529 that we would have money for her to go to college. As my wife and I are both teachers, we also made sure to tell her she was not going into education. She asked what happens if I do I said you cousin gets your 529 and you have to take out loans. We will not pay for that degree.
This is particularly interesting bc my husband and I are both educators and we also don't want our children to be teachers. Stagnant salaries, terrible work hours/conditions, and the top salaries (even for admin) don't come anywhere close to other careers.
Interesting. Family are teachers and we would disagree but I think it's getting off topic. How many other jobs give 13 weeks of PTO that you can actually take? They save a ton on summer daycare.
Dennisl
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Re: Telling Kids about 529 plans

Post by Dennisl »

Fear is a pretty powerful motivator. I lived my life afraid to fail. Still do. My parents had no means of helping me pay for college. Between scholarships, loans and 2 jobs, I made it work. College was pretty stressful, but it had it's fun moments. My kids won't be getting any need based aid. That's because of my income, and isn't a reflection of them. The university I attended now costs $71k a year. It's not realistic for me to ask them to cover a significant portion of that. I'll probably have him cover beer money and maybe books. I'll make my expectations clear. I'll pay for 4 years of college, unless there is an extenuating circumstance. They can major in what they want. See what college costs. See what jobs are available based on major and what the expected earnings are to be. Might help them out for a few months to get settled after college, but they're on their own after that. By that time, they'll have had a lifetime of privilege and advantages, whether that be in the form of sports, tutors, music lessons, etc. If they can't make it work on their own by that time, I would see it as a personal failure as well as be severely disappointed in my kid. There were rough stretches where I rationed out a pack of oreos and tap water to make it work or lived off canned vegetables. Not sure that's what I want for my kids to create that same hunger and mentality. I had too much pride to ask my parents or anyone for help because I knew that my folks were scraping by and didn't want them to feel bad about not being able to help out. I'm not sure of the mentality of the current upcoming generation. You can call them soft, but I'm a bit scarred from my experiences. Maybe there is a better way, hence I come to this forum to pick your brains and experiences.
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Re: Telling Kids about 529 plans

Post by Wannaretireearly »

This is a thread to bookmark for sure. Love the commentary about starting to set expectations in middle school.

Like the comment that ‘if the kids work hard and get into a great school, we’ll help make it happen’.

I don’t want to be in a conversation during/post college where kids say…I didn’t know that was an option to me.

I look back to having a fun time in college, while getting relevant paid work experience internships, and getting close to top grades. Enabled by grants/scholarships and some kicked in by parents, plus a small govt loan. What a great time college is/was! Plus blew all internship money on travel final summer! (Good commentary on this in ‘die with zero’)

I want my kids to have the same experience, or better, while prepping for working life or grad school.

My parents and In laws set the bar high, even helping us with Reno costs, as they can/wanted to while living very frugally.

Life is such a balance.
Death and taxes. Only one is under your control!
cshell2
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Re: Telling Kids about 529 plans

Post by cshell2 »

tenkuky wrote: Wed Oct 13, 2021 10:33 am
Boglegrappler wrote: Wed Oct 13, 2021 10:30 am From the instructions for FAFSA
Investments also include qualified educational benefits or education savings accounts (e.g., Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans). For a student who does not report parental information, the accounts owned by the student (and/or the student’s spouse) are reported as student investments in question 41. For a student who must report parental information, the accounts are reported as parental investments in question 89, including all accounts owned by the student and all accounts owned by the parents for any member of the household
AAAAARGH
I must have missed that.
It is already submitted.
Can I retract and add the info in?
Our EFC makes it impossible that adding in any amount changes anything. Already teen realizes "loan" is only option.
Would anyone suggest I find a way to change this, knowing it will make no difference?
AGI not < 50K
According to this you have to print out the SAR, put the corrections on it and mail it in.

https://studentaid.gov/apply-for-aid/fa ... how-change

Honestly, if I was in this position and EFC was already too high for any financial aid, I might just let it go myself.
stoptothink
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Re: Telling Kids about 529 plans

Post by stoptothink »

forgeblast wrote: Fri Oct 15, 2021 11:31 am
stoptothink wrote: Thu Oct 14, 2021 2:56 pm
forgeblast wrote: Thu Oct 14, 2021 1:30 pm I started telling my daughter as soon as we started saving for her 529 that we would have money for her to go to college. As my wife and I are both teachers, we also made sure to tell her she was not going into education. She asked what happens if I do I said you cousin gets your 529 and you have to take out loans. We will not pay for that degree.
Why? Teaching certainly is not one of the higher-paying professions for college grads, but it tends to pay median income salaries and has many other benefits. For some it truly is "a calling", it definitely is for my step-father and maybe my sister as well (she's still early in her career). I guess this is common with people of all professionals, as we are seeing multiple MDs saying they tell their children not to get into medicine. As an exercise physiologist and health scientist, I guess I should council my children to study something else because the data suggests there is little opportunity, even though it has worked out quite well for me.
The amount of education required for keeping the degree/teaching license puts teachers at a huge disadvantage when it comes it comparable education and salary's. The amount of behavioral issues coming to schools and the fact that we do more and more and more for the community that looks at us a glorified baby sitters is frustrating on so many levels.
Pa no long as a guaranteed defined pension for new hires. Medical is not paid for by the district, and we have high deductibles. The one saving grace was the retirement and they took that away for new hires. We have had teachers quit mid year, because they are fed up and can make more outside of education.
We are seeing that very few college grads are going into education so there are no subs. This translates to no break because you need to cover other classes on a daily basis.
The buildings are outdated with very little ventilation, it was 87 in my room in August and the humidity was so bad no posters would stay on the walls. I could go on an on, I am teaching 22 years and every year more gets dumped on us from a local and state level.
In my previous position I lost a handful of employees who went into public school teaching. I can tell you that teaching requires less education/credentialing and pays better, with fewer workdays, than working in a lab as a chemist or biologist (I oversaw our labs as one component of my previous position). I don't really get the poo-pooing of teaching as a job, for an "average" college grad. My sister started at $43k/yr, finished an online masters in 9 months and got an immediate bump to $47k/yr, and has awesome benefits. Not bad for a 26yr old who was a very mediocre student, never did anything else but entry-level work, and (to be honest) isn't really cut out for a lot of other careers. My step-dad now makes ~$80k in the same district, and he actually quit (almost 20yrs ago) his marketing job to teach because it paid as well (he is not one with the drive to move up the ladder), but with better benefits and much better stability.

IMO, if you are an average student and not super driven, you can definitely do worse. Of course, none of us want to think our kids are just average.
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