Should you save for your kids’ college?

Should you save for your kids' college?
My husband and I both graduated from our undergraduate degrees debt-free thanks to scholarships, grants and financial aid. Yet even with having graduated with no debt and without having to rely on our parents, we continue to contribute to our son’s college savings.

Our reasons are of course personal, and are in no way a call-to-action for everyone to do the same. For one thing, we have wiggle room in our budget; if we were heavily mired in credit card debt or have other, more pressing needs, college savings wouldn’t be anywhere near our priorities.

Secondly, we already save for retirement. A common piece of advice is to ensure your own retirement before your children’s college fund because, while our kids can take out a student loan, parents can’t exactly apply for a “retirement loan.” So I contribute to my 401(k) and IRA before putting any savings into his college fund.

We also loved our college years and, just as vegetarian parents pass on their lifestyle to their kids, so do we with ours. I truly believe that for most people, education provides opportunities, from measurable benefits like income and careers to the more subtle ones like building character, forming relationships and opening our eyes to a wider world (I can definitely attest to that last one).

And finally, those same scholarships and financial aid my husband and I received aren’t guaranteed come the time my toddler enters his college years. A big reason we received grants and aid was due to our parents’ financial constraints—my mom was a single mom with two children in college, and my husband’s parents weren’t rolling in the dough either. My husband and I, on the other hand, are probably right in that middle class trap where we’re not poor enough to qualify for aid but not rich enough to comfortably pay for everything.

And so while our parents weren’t able to contribute much to my husband’s and my college years, we’re taking it upon ourselves to save a bit here and there for our toddler’s. We don’t make it a point to save the entire amount, but do try to contribute whenever we can.

Some argue that paying for kids’ college years breeds ingratitude and encourages laziness when students themselves don’t have to work to pay for college, aka the spoiled brat syndrome. I can’t agree with this, since I didn’t pay for college but worked hard nonetheless, all the while appreciating  every experience and opportunity. If students disregards their parents’ money and efforts at sending to them college, their ingratitude might stem from a deeper reason and one that didn’t just pop up because they got a free ride.

I inserted a poll on the right sidebar of the blog asking whether you’re contributing to your children’s college funds. Below are the results:

  • 71% are trying to pay for some of it
  • 21% are trying to pay for all of it
  • 7% are not saving for it

I was surprised to see that trying paying for all of it (21%) was higher than not saving for college (7%). Perhaps the economy has led me to think that college savings aren’t as high on people’s priority lists, but I thought more folks would be opting out of college savings. Then again, maybe it’s because of the economy—particularly the difficult job market and higher competition for recent grads—that have led more of you to contribute to college savings.

Tell me which option you chose, and why:

Are you saving for your children’s college? Do you plan to pay for all of it, some of it, or none of it? Why or why not?

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Ask the readers: How much do kids cost?

How much do kids cost?
A few months ago, my husband and I increased our weekly grocery budget from $120 to $160 to accommodate our growing toddler’s appetite. We also moved to a two-bedroom unit, bringing our rent up $200 more a month. And of course we bought all the little things that seem minor but surely add up: bath books and toys, garden supplies to grow carrots on our patio, and a child-sized table and chairs we recently purchased at the furniture store.

They don’t kid you when they say kids are expensive. Or are they?

I’ve read a few articles citing that raising one child from birth to 18 years old can cost upward of $143,790—and that’s on the low end. The more income parents make, the likelier they’ll spend on their children, and those who live in cities with higher cost of living tend to spend more as well. And I’m not one to argue. Just the year I was pregnant cost us thousands of dollars alone. Yikes.

My husband and I spend more now that we have a child than when we didn’t. In addition to the costs I mentioned earlier, we also spent on big-ticket items like strollers and car seats. Continuous expenditures like diapers and food have also eaten at our wallets, as have child-centered entertainment like going to the science center or the children’s museum. Child care is another new expense, and if we decide to enroll our toddler in a preschool or private school in the future, that number isn’t going down. We also opened a 529 college fund, and by far college savings is the biggest child-related expense in our budget.

But just as costs continue to rise, we’ve also managed to control or even remove previous expenses because we have a kid. The last movie my husband and I saw in the theaters was Harry Potter. Other non-kid-friendly entertainment—watching plays, going out to bars, attending sports events—are special treats, not a frequent occurrence. We tend to stay home or hang out in local spots nowadays. And because we have a third member in our family, we’re stricter with how we spend our money and time.

We also try to save money by going to free events or venues. We’ll happily go to an outdoor shopping center because they have an awesome children’s area—free. Or we’ll go to the library or the park. Thankfully toddlers aren’t too high-maintenance when it comes to entertainment; my little guy loves walking around the block and being outdoors. We’ve also kept some expenditures low by buying them occasionally. Most of our books, movies and CDs are borrowed free from the library, and clothes and toys for our toddler are purchased once in a while.

So while my husband and I have breathing room in our budget for our toddler, there’s no denying that LO has increased our expenses, from obvious costs like diaper cream to more subtle ones like a date night alone for my husband and me. We compensate by doing our best to minimize costs and increase savings as much as possible.

That’s how my family handles the costs of having a kid. How much do kids cost in YOUR family? Are kids as expensive as they’re made out to be? What are your biggest expenses after having kids? Have you been able to minimize some expenses *because* of having kids? Have finances determined whether or not you decided to expand your family?

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How to be a frugal mom and still buy Pampers

I buy Pampers instead of generic, shop at a farmers market, and buy new toys for my toddler. Despite all that, I still claim to be a frugal mom.

How? By choosing to spend on what’s important to my family while aggressively cutting back on what’s not.

Take diapers, for instance. We tried several brands and even considered cloth diapers, but Pampers won my baby’s heart (and bottom). If I ran my budget strictly by the numbers, I would have insisted on buying the least expensive brand, regardless of its performance and ease. Instead, I’m willing to spend more on what works for us and find ways to lower costs as much as possible (I buy Pampers in bulk online using my credit card rewards mall, which gives me an extra 15 points per dollar for that particular online store).

Buying organic food is another example. We shop at the farmers market so for several reasons—to support local communities and eat tastier food among them—but we limit how much we spend per week (that $30 fish would just eat up our budget!) and use most of our purchases to cook at home.

Frugality is a lifestyle, and like any long-term lifestyle, needs to be sustainable. Yes, we could deprive ourselves and live bare bones, but that mindset will hardly go far and is likely difficult to maintain. Instead, we’ll gladly pay the cost of something we enjoy (assuming that it doesn’t eat up most of our income) and skimp on everything else.

So while diapers and food remain a high cost for our family, we’ve tightened our budget on a few other categories:

We frequent the library
Every week I borrow at least six library books for my toddler to read. I can run a search through my library’s website, place holds on the books I’m interested in and pick them up at my convenience—all for free! If my toddler isn’t interested in particular books, I don’t have to worry about buyer’s remorse since we don’t own them. We still buy him books, but at least he’s “test-driven” them before we even spent a dime. The library also hosts free children’s events such as story time or musical performances that we’ve attended.

We cook at home
We hardly eat at restaurants and rely on home-cooked meals. Since we don’t mind spending time in the kitchen, we’re able to save quite a bit, especially since we use leftovers for lunch at work the next day.

We hang out at the park and find free entertainment
My toddler loves going to the park, whether it’s to run on the grass, climb around on the playground, look for pine cones, scoop some sand, or even simply sit and pick flowers from the ground. We’ve gone to practically every park there is in our city. We also find free entertainment or venues: parades, festivals, free museum days. Even shopping centers offer free playgrounds or fountains (if you can avoid walking into the stores!).

We don’t drive fancy cars
When the time came to replace my dying Corolla, we were tempted to take the money we’ve saved and use it as a down payment for a fancier (or even larger) car. But we had enough money saved that would have allowed us to buy another basic Corolla with cash, which is what we did. For us, we just wanted a car that functions and provides basic comfort.

We look for promo codes and printable coupons
Although we buy our toddler new clothes, we opt for lower-cost brands and look for promo codes or printable coupons. Any time I shop online and there’s a field to enter a promo code, I’ll quickly google the store’s name and the words “promo code” to see if anything comes up. Or if I’m planning to go to the actual store, I’ll google the store’s name and “printable coupons.” Usually there’s a code for free shipping or a coupon for a percentage off your purchase.

We don’t buy our toddler too many toys and gifts
This past Christmas, we bought our toddler one gift—and it cost $16. For his birthday, we didn’t buy him any gifts and instead threw a little party with his immediate family. Children don’t really need too many toys and gadgets. I even think boredom is good for them since it forces them to crank up their imagination. And when we do buy him a toy, we’re almost always sure he’ll love it (because we know what he’s interested in) and they’re usually good-quality, long-lasting toys.

 What’s important to you?
Our expenditures may be similar to some families while completely opposite for others; neither is necessarily more frugal than the other. So long as you’re clear about your priorities and your budget has room, you can continue spending on what matters to you and cut back on those that don’t.

What do you willingly spend more money on? What do you cut back on?

The cost of raising a child

There was an article on CNN about the rising costs of raising a child from birth to 18 years old. I wanted to see how I compare to the national averages, and here is what I discovered (remember this is over 18 years, not yearly; I just averaged mine out):

Clothing
National average: $13,200
Ours:$2,925

Health care
National average: $18,420
Ours: $4,071 (LO is under my husband’s HMO so we don’t pay copays and thankfully LO has been healthy)

Transportation
National average: $30,900
Ours: Not sure. We bought a new car this year but it’s the same model I had even before we had a kid. We do want our next car to be larger though, so I would guess $10,000 on this one.

Food
National average: $36,210
Ours: $5,934. I’m not sure how they came up with their number, but this is the amount we would spend on just LO’s food.

Child care and education
National average: $39,420
Ours: $142,560. This is the cost of child care (this doesn’t include college savings). I’m not sure what we’re going to do once LO reaches kindergarten. I’d like for him to go to the language immersion public school here that has high scores (and it’s free!), but it’s on a lottery system. I’m not keen on the public school near us, so if we don’t get into the language immersion school we may opt to go private school if we can afford it.

Housing
National average: $69,660
Ours: $44,502. I used what we pay extra for our two-bedroom than what we paid when we were in a one-bedroom, then added nursery and furniture stuff.

Miscellaneous
National average: $19,110
Ours: $90,913. This includes diapers, entertainment, educational toys, baby gear, college fund, maternity clothes, and toiletries. I think the college fund is greatly inflating this number though.

So yeah, it costs a lot to have a kid!

Why I save for LO’s college education

I saw this graph online the other day about the average unemployment and average income for people depending on their college education:

I was raised with the mindset that you go to college, and that’s that—no reasons were needed. Nowadays online I hear a lot of people bashing college education as a waste, especially when you see people (usually billionaires) who dropped out of college and started their own companies and are richer than most college grads. But on average, the higher you go up the education ladder, the less unemployment you will have, and the more income you will make. Of course you will have the billionaire who didn’t graduate, or the Ph.D. who still can’t find a job, but in general, you’re better off having a degree.

I’ve been saving money for LO’s college fund. I don’t set aside a fixed amount; rather, whenever I have extra money leftover each month, I put a quarter of that into his college savings. So far I’ve saved $6k or so. I was fortunate that I didn’t need to pay for my own college (scholarships plus financial aid) but I’d rather be prepared when it comes time for LO to pay for school. I doubt we can cover all of his expenses but at least he won’t graduate with excess debt, or he won’t be limited to where he wants to go because of the high costs.

College savings is definitely one of the biggest ongoing expenses for LO, but I think it’s worth it. We’re saving for retirement, we have fun money, we have life and disability insurance and every other savings you can think of (can you tell I’m addicted to saving?) so why not put that money into his education? And they say the sooner you start saving, the better.