Having a second child is a whole new ball game in the wild world of parenting and especially — surprise, surprise — finances. When Sally was an only child, I was excited at any chance I got to spend money on her because the costs were minimal with just one child. And we felt bright-eyed and bushy-tailed as we planned out her future college fund. But doubling that college fund for a second child seemed a bit more daunting. But we decided to finally face the music and start contributing to both of our girls’ educations now.
Before I go into the details of what we’ve contributed to our girls’ 529 college savings plans, here’s a little recap on our thoughts for our girls’ educations:
What We’ll Pay
We’d like to be able to cover our kids’ first year of necessary college expenses (textbooks, tuition, housing, food, etc.). When it comes to unnecessary expenses (clothing, entertainment, etc.), they’ll be responsible for figuring out their own way to make ends meet. After the first year of college, we’ll continue to help financially if they maintain a certain GPA. That way, in a sense, they’ll be earning our help after that first year. Of course, this is all one big hypothetical of us pretending we know how we’ll want to parent our girls sixteen years from now.
So how did we come up with a number for how much we’ll need to save? Easy — and a little sneaky. We attended, met at, and graduated from BYU. We’re still big fans of our alma mater, especially because year-in, year-out, they show up near the top of “best value” lists for prospective students such as MONEY’s Best ROI Colleges where it ranks #15. So we took the cost of tuition for one year (roughly $5,000) multiplied by four years plus an extra $10k for freshman year expenses and we settled on $30k. Now if our kiddos don’t take the hint and choose a different school, that’s a-okay, but they’ll be working with the same budget. So that’s that.
How We Plan to Do It
We did a post a while back all about cheating our 529. In it, we discussed the advantages of contributing to Sally’s 529 in large chunks over the next few years, rather than gradually contributing to it in small amounts until she goes to college. Now with two kids in the mix, we’ve still decided that’s the way we’d like to go, just split between the two of them.
Contributing large chunks of money might not be the best option for everyone, but for a few reasons, it’s what seems best for us. First, with our daughters at their current ages, our expenses are fairly minimal. We’re currently debt free, and we’ve already padded our emergency fund, and contributed to our retirement funds for the year. Rather than having savings that’s sitting around doing nothing, we decided to put some of it to work, gaining compounding interest and making money babies for our babies’ educations.
So right after Winnie was born, we put $10,000 (that we had been saving for over a year) into separate 529s for our girls. We gave Sally’s $6,000 and Winnie’s $4,000. Sally’s received a little bit more since we were behind on her contributions. Depending on who’s better behaved each year, we’ll contribute more or less to their fund. Kidding… Sally would be in the negative already ;). One of our goals this year was to make our girls’ 529s a priority (especially since NY had generous 529 tax breaks), so we finally did just that. Barring any major unexpected expenses, we’re hoping to continue contributing large chunks each year for a couple years to get a solid enough principal amount (somewhere between $10k and $15k) that will compound and grow and have money babies that reach our $30k target amount by the time they’re ready for college.
Annnd I’m excited to say that Johnny will be sharing a post soon that walks you through the ins and outs of opening and contributing to a 529 plan — at least how we did it. It’s another financial milestone to check off our list. Now excuse me while I find some Kleenex to sob into thinking about my girls leaving for college in 15+ years.