Am I a terrible future dad? Be honest. I kind of am.

January 30, 2014 · 40 comments

So I posted up my annual budget a few weeks backs. A surprisingly high number of you all seemed to ask the same question in the comments section of that post.

“Uhhh, Ninja… where’s the college savings fund line item?” -You Guys

Excuse e moi?

I’m sorry.

I punched Sallie Mae in the face a long time ago. College fund? I’ve already been to college. Why do I need to save for it again?

Oh.

You mean where is the college savings fund for my fetus? Gotcha. You really should be more specific.

Well amigos, there isn’t one.

It’s a fetus. 

College Fund

 

In all seriousness, I’m not quite sure exactly how I feel about a college savings fund. I mean I know I will save for my children’s college, but I don’t know in what capacity, or where it will fall on my priority list.

If you’ve been reading my blog over the last couples years, this shouldn’t really be a shock to you considering I literally wrote a post titled My kids will be dumb.

Before I worry about whether my kid will get a B.A. or a B.S. I need to make sure I’m properly taking care of myself and my bride. That means putting a roof over our head, food on the table, and saving money for our future via retirement and personal savings.

Even if the crap hits the fan and we weren’t able to put any money away, there will be options for our kid.

  • Pay his way through school.
  • Community college.
  • State school.
  • Student loans.

I don’t think these options will need to be considered, but they are still options nonetheless. Heck, I didn’t have a college savings fund set aside for me and I turned out alright… I think. 

For now, I’m holding off on opening up an official college savings fund (like a 529 or ESA) until I get a better handle on how parenting (and losing an income) will impact our overall financial picture. Maybe this makes me a terrible person, but I like to think it makes me wise ;)

Where does your children’s college education fall on your priority list? Above or below retirement funding?

1 Marissa@Financetriggers

It is said that by failing to prepare your are preparing to fail. Making preparations for the near future would a wise decision for everyone. Well, children’s college education and retirement funding must be in equal priority. In doing so, you’re prepared not to fail.

2 Erin @ Red Debted Stepchild

No, it absolutely should not. You can’t take out student loans or get scholarships for retirement. Ninja didn’t have help, I didn’t have help, Fetus will be fine without help (which is unlikely, as Ninja said). Also, if Ninja and GN don’t prepare for retirement, Fetus is going to have to take care of them in old age. I’m sure he/she would much rather take on a few loans.

3 Lisa E. @ Lisa Vs. The Loans

I absolutely agree with Erin. I think that take care of myself would help my future kids just as much, if not more, than if I paid for their school out of pocket. Of course, I’d love to help. But I have to prioritize my future self. It’s like the whole “help yourself first before you can help others” speech in the plane when they talk about putting on air masks.

4 Midwest

Definitely below.

5 TPol

The priority of College savings should be below retirement savings but should still be one of the top priorities. College education is expensive in your country and I read many PF bloggers who are buried under mountains of student debt. I sure wouldn’t want my kid start life with boatload of debt if I could avoid that. Small savings can add to quiet a bit and I would have loved to help out my kid if I had any:)

6 Kasia

Children’s college education seems so far off and unimportant when you’ve got other things to take care of. But with time on your side you can make the most of compound interest to increase the funds for your child’s future.

We’re due in May and I have already considered my child’s financial future. While I don’t believe in specific college funds because you just never know whether your kid is going to want to be a doctor, carpenter or check-out chic, I do think it’s wise to invest cash regularly for your kids.

When the little one arrives we are planning to open a shares account and contribute $1000-$2000 per year. With 5-8% return after 18 years there will be a nice chunk there. Once our child is 18 or 21 we can decide whether to use the funds for their college education, to help them purchase their first property or travel the world depending on their situation and maturity.

7 Megan @ First Home Freedom

I see nothing wrong with NOT having a college savings plan for your children. My parents told me that they could either pay for me to go to college someday, or retire! So I was on my own in that aspect, and completely appreciate that they did that! It made me more focused on getting a scholarship and taking care of my finances so young. There is a lot to learn from paying for college yourself.

8 Erin @ Red Debted Stepchild

No, you aren’t a terrible future dad. Your responsibility is to take care of your child from birth to age 18. Anything else is a gift, and it sounds like one you are willing to make. You don’t have to open a college account for a Fetus. You obviously have your financial shit together and I’m sure you’ll be able to save up the money you wish to contribute to your kid’s college education.

Keep on contributing to that retirement, Ninja :)

9 Anne @ Unique Gifter

I don’t know enough about the taxation and incentives for college savings plans in the US. However, here is my suggestion: You may receive cash gifts, when Fetus is born, birthdays, Christmas, etc. You may want to consider putting those into a college fund, especially if there are matching or tax benefits for doing so. Maybe you will want or need to use the funds for something else, but I would look into setting things up so that the option is there if you so choose. It’s all personal choice and whatnot though.

10 StackingCash

I think it’s fine not to specifically save for an education fund. Although, I would consider any tax advantages it might have. As long as you provide some sort of foundation for your children and not spoil them too much they will be fine like yourself. In regards to higher education, I am afraid that all schools are designed as for profit schools. I feel the easy access to student loans has inflated the costs, similar to the recent housing bubble and that current low interest rates allowing another one.

11 Bert

If not having a college fund makes you a bad Dad, then I’m a bad Dad times 5! (5 young’uns). I made it, so will they. And you have your priorities straight- take care of you and your bride first, then everyone else. Good work. College will work itself out in time.

12 Allie

Not terrible. There are an awful lot of parents who are not able to provide funds for their kids to go to school, but that doesn’t mean college is off the table. I paid my own way, and I think I’m better off for it because I had to work and knew how much money I’d be throwing away if I skipped classes! My parents and grandparents all paid their own way through school too. Besides, it seems like there’s a lot of turmoil regarding student loans right now, which ones should be able to be forgiven, people complaining about how it’s cost prohibitive to go to school now… heck, who knows? By the time Baby Ninja’s in college, maybe they’ll have figured out how to fairly lower tuition prices and all the loan companies will be out of business. (Not holding my breath, but you never know.)

13 Ladam8518

I am in the same boat. An eight month old daughter and no college fund. I paid for college myself, my parents couldn’t afford to help except with books every other semester. I am paying off the last set of loans this year (11 years after graduation, but four of those years spent in graduate school). The education wasn’t cheap, but has made up for it in employment options.

I view my retirement to be the number one long term priority. If I have funds to help my daughter with college, I will, but I am not restructuring my finances in order to do so.

My parents paid for my youngest sister to go to college, she finally ended up in the air force after several short stints at multiple schools trying to figure out what she wanted. I think having to pay for college myself and worrying about repaying student loans helped focus me in choosing a degree path and completing it. My sister, not having that worry, was able to explore what she was interested in rather than what would pay the bills in the future and so was constantly changing majors and schools looking for a perfect option.

I also lucked out in that I love the sciences and math, so choosing an engineering degree was an easy choice – one that pays well and in a field I enjoy learning about and working in.

14 Momager

Our daughter is 10 and doesn’t have a college fund. We didn’t want to use the 529 because of the restrictions tied to the funds. What if she wants to do something with her life that is not within those guidelines? That money would be sitting there, wasted. We’ll still help her with whatever she wants to do for her future, but now she has the freedom of choice without us pushing something on her.

15 MelissaZ

I don’t think it’s necessary to start a college fund, especially before the child is even born. I think it’s much worse not to be able to take care of yourself (and put that burden on your child(ren)) than to not provide money for school. Plus, while school is important, you never know which direction your kid will choose to go and college savings plans are very restrictive on use. We just set up a savings account and extra money from the budget & birthdays & christmas gets deposited. Someday she can use it for college or starting a business or something. Or if she’s not responsible or not ready, we’re not required to give it to her & its an extra savings account for us!

16 Mysti

As one of those who advocated for a college savings plan….I would not say you are a “bad dad” for not having one. That said, you are actively (and aggressively) saving for retirement. If you diverted just some of that money towards baby “college fund” it would help your child in the future.

I didn’t have any help, and it has been a rough go. I wish I had the money to be able to offset some of my kids’ education (I do not believe that parents should pay 100%, but a helping hand goes a long way), but I don’t. At least not now.

You may have more children, and by starting with just a little bit now (even $100 a month, which you probably really wouldn’t miss in your day to day lives), it will turn into an asset for your child to tap when the time comes.

We always want better for our children than what we had.

17 Karen @ Coolfamilylife

I have 3 kids and put around $100 a month into a fund similar to the 529. I started it in 2005. My kids are between 7 and 14 and this fund is for all of them. That said, it will only be a small help. I did not receive much help and neither did my brothers and we all graduated university and they also both have two degrees. One degree in Canada and the other in the U.S. Also, we don’t know what the future will be like, maybe university will be completely different – virtual or on line in the future and more flexible in terms of working and studying concurrently!

18 Dreemsie

Paying for their education falls below our retirement savings.

$175 dollars a week for 22 years is a little over $200,000. That is what my wife and I hope to give our children for education from grade school through college.

19 Jane

Looks like I’m going to be in the minority here but funding for university/college here comes first for me before retirement funds…I do both but make sure to max out RESP first.

I’m in Canada – I don’t know about 529s – but we have something called RESPs. Basically you can contribute up to $2500 a year (for 15 years and you can’t do it after your child turns 18) and the government will kick in an extra $500 – or 20% of whatever you do contribute. If you start this fund too late, say when your child is 10, you’ll only have 8 years that you can contribute (you will lose that contribution room from the previous 10 years). I like the automatic 20% return from the government! It’s money that the government can contribute instead of potentially future me. I don’t plan to fund for my children anything beyond RESPs and depending on where they choose to go or what they choose to do if they will need more it will then be covered by them working/loans.

20 David S.

Ah with matching funds, that makes perfect since to contribute towards. Just like in the US with 401k retirement plans it makes since to contribute to the company match.

Here in the US there isn’t much of a benefit initially for college savings. You can contribute up to 2000 to an ESA (Coverdell) and unlimited to a 529 (state sponsored college accounts), but they just provide tax free growth and distributions, no tax deductions. Plus there are penalties applied to these accounts up to 10% on top of taxes if you are unable to use all the saved funds towards education.

21 Psychsarah

I too use RESPs for my kids. I can’t pass up the 20% match from the government. It won’t cover everything, but will help defray the significant costs. I had a bit of money my Nana saved for me, scholarships, and I worked part time during school and full time in the summer, so I finished 11 years of university with about $5000 in debt (I have a PhD, I wasn’t lollygagging to get my BA in over a decade). I hope my kids will learn the value of working hard and avoiding debt for school, but I do want to give them a leg up. Since you are careful stewards of your money, it surprises me that you would not set aside something for your progeny’s education. You know the burden of huge student loans. I’m not saying you’re a bad dad, I’m just a bit surprised. But hey, it’s your kid and your money!

22 Matt

I am also holding off on a 529. I don’t like the restrictions, and what if my child doesn’t want to go to college. I think my wife and I will need to come up with a plan as to saving for our kids future, but I don’t want my money to be restricted to a specific account only for education. It would be a waste if we built it up for 20 years and then our child decided not to pursue a college education.

23 Lindsey

I have a 5 year old and a 3 year old and neither one has a college savings account. I am not sure about 529’s because of the restrictions. I do agree that saving for retirement should be priority. Also, I should note, I have worked in higher education admissions/enrollment and advising for the past 8 years. Higher education is evolving rapidly and I’m not sure about the ROI on a college education in the next 15-20 years. Sure, if the kid needs a specific degree for a specific job, fine, but as an example, I have an MBA and I make less money than my sister who went through a 9 month beauty school program and who has a thriving business and robust clientele. Top it off with the fact that she LOVES what she does and she has total flexibility. I plan to pull from investments if and when my kids go to college and they can make up the difference.

24 SavvyFinancialLatina

I think your financial security should be first. I would max out retirement first, do some investments, then think about kid’s college fund.

25 Erin

We started a registered education saving plan as soon as our baby arrived- where we live, you receive a significant government contribution as well,(500 for opening account, 20% match of first 2500 dollars) and we can work it into our budget, so definitely don’t want to miss out

26 mollyjade

Retirement comes first. However, saving for kid’s college falls after saving for an adequate retirement and before saving for a really nice comfy retirement.

Growing up, I had the understanding with my parents that I could go to any college I could get into and they would pay, IF I got a job every summer and put most of that money into savings for college. Any birthday or holiday money went into my college fund, too. We were also strongly encouraged to work during school (especially college) if we could do so and still keep our grades up. I ended up paying most of my living expenses (food, medical expenses, books, entertainment, clothing, travel, and so on), and my parents paid for tuition.

I had a huge advantage over my peers by not starting out working life with giant student loans. And I still worked and paid enough for my education that it seemed valuable to me and that I understood the work necessary to earn money and learned some early budgeting and thrift skills.

I might be a bit stricter with my kid about which colleges are ok (expensive prestigious school is ok, but expensive party school is not), but I’d like to offer a similar deal. Education is one of my top priorities in life. (Along with family, community, health, and social justice.)

27 David S.

I have kids and have yet to start a college savings account for them. Though by time the first goes off to college the house will be paid off (about 6 months before he would enroll), thus our monthly expenses should be pretty low. Plus I am investing so that I could have a steady investment income to help as well.
So yes no 529 or ESA right now, but I am also positioning myself to still be able to contribute something if they need the help in getting their degree. And if you think about it, if I use the investment income then it is only an increase of 10% for dividends over what I would get from a 529 or ESA (just the tax savings) without the restrictions.

28 Brit

I so don’t like when the “bad parent” is thrown around when you don’t do something that others feel you should do. I don’t have a college fund for my children. I went to school work and paid for it. I don’t think my parents were bad parents because of that. You take care of you and what is best for your family.You are stressing because you are going to be a first time parent and that is normal. Bad future parent, I don’t think so.

29 Sara

College fund for future (nonexistent) kids = way below retirement fund. My parents paid for mine and my siblings’ college education using mutual funds, cashing out IRAs, etc. While I am grateful that I didn’t have any student loans, I wish they hadn’t done that. My parents are now both in their 60s and retirement is looking sketchy. I would much rather have paid loans and known that my parents were set for retirement than worry about how we would take care of them. Plus, to be honest, I didn’t make much of an effort to get scholarships for college because I knew it was covered. I think if I’d known it was my financial responsibility, I would have applied for way more scholarships and gotten a lot more of my tuition covered.

I think we’ll probably try to contribute some amount of money to our kids’ college funds, but we are undecided on if we want to try to pay for all of it or just a portion.

30 Michelle

I think you are fine and you will be a great dad! I didn’t receive any help and I don’t hate my parents for that. I managed to do it all on my own and my student loans are gone now (3 degrees completely paid for by the age of 24).

31 austin

Our financial advisor whom I trust very much recommended that we do not save more than 20% of what we’re saving for retirement towards the kids’ college. I’d much rather tell my girls “you get $X dollars to help toward your tuition” versus “Hey I hope you become a lawyer because mom and I are gonna need to live with you in 15 years.”

32 Guest

I think a valid reason, besides taking care of your current expenses now, is teaching your kid the value behind education. I know in my experience, myself and other peers whose parents were not helping out financially (for various reasons) worked a lot harder and took their academics more seriously than the students who had mommy and daddy pay their way for them. I don’t want to save money for my kids college education for that reason alone – they need to understand the purpose of education and the value behind working hard to get where you want in life. Life isn’t about receiving hand outs.

33 BRB

I work in Financial Aid and my director has children. She did the math on using a savings fund that specifically targeted for college and figured out you are better off just having a normal savings account for the kid and then if they decide they want to go to trade school or do something else or you don’t want to give them the money you can still use it for whatever.

34 CR

We started a 529 for $50/mo and we’ve been increasing contributions every year since. I don’t know yet if we’ll reach our target as my husband and I need to make sure we’re sorted first. I think it’s my way of paying back because my parents paid for my college education.

35 ss

I try to do both retirement and something for the kids. When I can’t do both, I defer to retirement.

After comparing 529s, Coverdells, and a regular high-interest savings account, we went with the savings account. We put in about $1200/year/kid which is not a huge amount and we started later, but it should be about $12k per kid. We didn’t want to tie it to going to college because I’m not convinced that’s the right choice for everyone or that it will be the right choice for my kids. (Plus, I’m secretly hoping for some sports scholarships – fencing for my son and soccer or crew for my daughter.) That was actually the advise that someone gave me when they were born – get your kids involved in fairly obscure sports where there are scholarships that go unused. Can’t hurt to try – especially if the kid loves the sport!

36 Scott W

I agree with most, definitely not a terrible dad. Having said that I will say that once baby ninja is here you and your wife will fall so in love with the little bugger that you will start to worry more for their future than your own and may change your tune. I do think saving for your future is a positive for baby ninja as well.

I save for both right now although retirement is the bigger focus. (I have two kids 8 and 7 years old)

You just wait until you have baby ninja looking up at you.

37 Mary

Since you and your wife are college educated, the likelihood that your child/ren will go to college is pretty much a lock. We saved for our 4 kids’ college but they were expected to pay for their personal expenses: clothes, eating out etc. We covered tuition, room/board and books. Our other deal with them was this: we can’t afford 4 yrs at a four year school, but if you attend a community college first and live at home, we’ll pay for that and the next 2 years. If you have your heart set on a 4 year, then you have to pay 50%. We didn’t raise any dummies: they all went for the c.c. route. One is an electrician (our foster son), one has a doctorate in physical therapy, one is a medical doctor (anesthesiologist) and the baby majored in theater, emphasis in performance (he works for a major insurance company in sales and also performs in local plays, so it worked out).

We did save for retirement but probably not as much as we could have done. The comment about only having to pay for your kids from birth to 18 made me cringe a little. This isn’t like when I was graduating from high school. You pretty much HAVE to have some sort of college education or trade school in order to get a good job. And the cost of that education is so much more expensive. I made $1.55 hr. at my summer job which paid for my tuition and personal expenses when in college. Even at $8 hr. now, that nowhere covers the cost. Of course parents should be saving for this. We used to throw our spare change in a jar (and I do pick up change on the ground) and put it into the “ed fund”. We invested that $$ and it was enough to pay for the community college years. We pretty much cash flowed each of their last two years at the university. Helped that they all received scholarships, too.
Bottom line: if you’re going to have children, you need to assist them as much as possible in achieving their highest potential. And that means saving for college. Good luck.

38 ZanBrody

Wow Mary- That is an awesome way to do it! I feel like you contributed, but didn’t hand over a free ride.

39 Hounddawg

Hey Ninja-

Found this article shortly after reading your blog post. Now you can say you ARE saving for Baby’s college education – even if you likely won’t ever use it for that purpose, kinda serves the same purpose, right?
http://www.cnbc.com/id/101323957

40 Rezdent Goddess

Oh wow. Baby ninja isn’t even here yet and you already got your first “bad dad” moment.
What baby will need most is milk, sleep and love. Lots of love and guidance.
Baby doesn’t “need” a college fund – plenty of healthy people with fulfilling lives never went to college or paid their own way. Are you also starting an orthodontics fund? It is NEVER too early to worry about BN’s braces ;)
Welcome to the world of parenting. You’ll do your best. There will be no shortage of opinions about what you should do. In your own eyes you’ll often doubt yourself. But Baby Ninja will love you. College fund? I’m with the others – general fund but only IF you can swing it and retirement too.

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