Planning for FI College

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Should you save for college? Will college be free in the future? Will you have so much in assets or income that you can pay from that source?

Too many unknowns. If your children are young, I would suggest opening a 529 plan (talk to your investment advisor about which plan is best for your situation, and how to structure the investments). Personally, my favorite plan is HERE. I prefer to structure a diversified investment portfolio for my kids out of the DFA mutual funds I can access through that site. I prefer a more aggressive asset allocation all the way through college, for my own kids. My daughter is 13, and we already have a good chunk of money in her 529 plan account, so I have switched her savings going forward to a cash savings and investments outside the 529. That way I have flexibility – if markets are doing well when she is a freshman, I will pay her tuition with the 529. If they are not doing well, I will use my cash. Also, the value of the 529 is in growth in the account. If you switch the investments to all bonds, you have severely limited that growth (but also limited your risk, so that is also a trade off).

Having choices and leveraging long-term compounding are my favorite options. This is why I like to save aggressively in a 529 when kids are young, and then change to saving in cash when the child starts high school (yes, I switched a year earlier, but the decision depends on YOUR PERSONAL SITUATION, including how much you already have in 529s/investments; how much of the tuition you expect to pay and how much you think tuition will be.)

Which leads me to my next point – the most important consideration in paying for college is where your child will attend. If you want to be FI and you want your child to be FI, then they don’t get to go wherever they want to study whatever they want.

A college education is valuable based on what the child does with it, not necessarily where it came from or even the degree it was in. I leveraged a business/accounting degree from a state school into a successful business. I think it cost my parents $5,000/year. I’d say that was a great value. I know people who graduated from private schools who were unable to get a job.

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