I’ve Paid For This Twice Already…

Choice #3: Contributing to College Accounts

Yes, we’re in debt. We’re getting out of debt, but we’re nowhere near there yet. With one exception (our car loan), all of our debts have much higher interest than our savings accounts earn. And yet, I am still saving a modest amount of money each month in two special accounts. Those accounts are college savings funds for my kids, and unless some drastic circumstance happens, I will continue to faithfully contribute to each of them.

I know all the arguments by heart. I know that the interest I am earning is not as good as the interest I would save by paying down debt. I know that my kids can get loans for college (in fact, my spouse and I are living proof of that, years and years after our respective graduations…) and we can’t get a loan for retirement (we do save a bit for retirement too). I know that if I focus everything into debt reduction, I can make up for it later with larger contributions to their accounts.

I have two reasons why I keep putting money away for my kids college. One is that I am just enamored with compound interest. The whole idea of it, and making it work for me, is a lure I just cannot completely ignore. I can’t help but want to make that interest work as long as possible for me and my children.

The other reason is a much less tangible one and very much tied into the emotions of my spouse and me. Because I grew up in a lower-income household, where my parents were making barely enough to squeak by, even by financial aid standards, I qualified for need-based scholarships from the college of my choice. I was able to go to my first choice school simply because we were poor and I chose a small liberal arts college that has a large endowment and need-based funding for students. My spouse wasn’t quite as fortunate. His parents were in a higher income bracket than mine, but had a similar amount saved to go towards his education (read that as not too much). He didn’t qualify for near as much financial aid, and ended up going to a large state school instead of his first choice. Now was that a bad thing? No one can judge that and go back in time to see how it might have turned out if it was different. But what I do know is that over a decade later, this is still something that my spouse is not happy with. I know if all else was equal, if he could go back and go to his first choice school instead, he would. My children will have to make some hard choices in life, this I know. But as far as a college education, I want to as best we can, try to give them all the options that we possibly can.

Now, I am not sacrificing our entire future for the sake of our children’s. I save a very small amount per month each. Once we are out of debt I plan to up that significantly, but I will also be upping our retirement savings and by a bigger margin. I won’t be able to save every penny they will need for any school they choose, but I plan to try and do the best we can. It is important to me that my children consider the idea of going to college - and if *I* want them to do something so expensive, I feel I should contribute to that monetarily as well.

I do need to establish 529 accounts for both of the kids though vs the savings accounts I currently use. I have been procrastinating simply because the idea is new to me and it makes me nervous - I am a creature of habit and disrupting my routine and branching out makes me edgy. 2008 will be the year of the 529. This I decree. I need to harness better compound growth ASAP.

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