My Daughter Was Born Days Ago, Now It’s Time To Start Saving For College!

A few weeks ago my wife and I had the ultimate of blessings – Mrs. FV gave birth to our adorable baby girl – we’ll call her Little FV.

It was a rough pregnancy at the end, and we are happy that both Mrs. and Little FV are doing great and back at home after several days in the hospital.

Now that we are adjusting to having our new addition to our family (and first child) and getting into a routine, it’s hard to believe that Little FV will be all grown up and going to college before I know it.  I’m going to enjoy every minute of it, because as everyone tells me, the 18 years from newborn to college will go by before I know it.

Paying for Little FV to go to college is very important to me.  With skyrocketing tuition rates year over year, the average student loan debt is now $37,172.  The average law student borrows $112,776 to finance their degree.

I had academic scholarships for both college and law school, but even so, had to borrow $80,000 to finance 7 years of higher education and room and board.

I don’t want Little FV to graduate with crushing student loan debt.  I want her to be able to start out her career (whatever it may be) with the freedom to start saving for her financial independence, not trying to get out from under a mountain of debt.

As a result, even though Little FV doesn’t have a social security number yet, I have been researching saving for college options including 529 investment plans so that I can get started building her college fund in a tax advantaged account as soon as possible.

Vanguard has a very helpful college cost calculator that helps you project the total cost of 4 years of college.

Assuming you are doing a traditional 529 savings plan, you can pick general categories of schools (such as public in-state, public out-of-state, private or expensive private) or individual schools and see what it costs to attend these schools today.

You can then play with variables on the amount of your investment contributions, the rate of return and the rate of tuition increases to see if you will meet your funding goals, and if not, the additional amount you need to contribute to get there.

According to Vanguard, the average combined tuition and room and board at a public in-state college in 2018 is $20,700, while an expensive private school is $58,273.

Using Vanguard’s default assumption of annual tuition increases of 5%, the 4 year cost of attending a public in-state school will be $215,443 by the time Little FV goes to college. If I don’t front-end any savings and finance her education through only monthly investment over 18 years at Vanguard’s default investment return assumption of 6%,  I’ll need to save $451 per month to pay for her 4 years of college.

Using the same default rates, the 4 year cost of attending an expensive private school will be $604,456, with tuition costs ranging from $140,000 to $162,000 per year in 18 years.  Yikes!  If I don’t front-end any savings, I’ll need to save $1,265 per month for 18 years.

Hopefully tuition rates won’t continue to rise at 5% per year, and the investment returns will be better.  However, I am not planning on it. It’s better to save early to maximize compounding, and then adjust as needed over time.

Readers:  How did you plan to handle saving for college for your children?


8 Replies to “My Daughter Was Born Days Ago, Now It’s Time To Start Saving For College!”

  1. Congratulations on the new addition.

    You are right that time flies the moment you have a little one. I can’t believe it but my girl is about to be a teenager in a little over a month.

    You are definitely ahead of the game planning for college for your daughter and have time on your side. A 529 is a great way to go.

    Even without front loading in your situation you can put over 30k/yr in it just from you and your wife. I’m single so I am limited to half that.

    The rate of tuition increase is insane and hopefully not sustainable. I wish my state offered it but sometimes you can get lucky and find states that offer purchase of tuition credit where you can lock in today’s tuition and redeem it years down the road.

    1. Thank you.

      It’s hard to believe that we could live in a world where going to college could cost $200,000 – $600,000 in a short period of time, but where the average retirement account is only a fraction of that. Sky high tuition certainty is not going to help the situation.

      Without help from their parents, kids in the future will have to work 40 years just to pay off their loans, let alone achieve financial independence.

  2. Congratulations!

    I’m a new dad too. My daughter was born almost 6 months ago. Being a father is so wonderful.

    Even though the pregnancy was rough, I’m glad your wife and daughter are doing well.

    My wife is an attorney too. She is currently taking 14 months off to take care of the baby.

    I haven’t started a 529 yet, but I plan to soon. Thanks for the reminder! 🙂

    1. Congrats on being a new dad! Being a father is life changing and something I would not trade for the world. You are a seasoned vet by now compared to me.

      I’m glad to hear that your wife is able to take off a good amount of time for maternity leave – my wife is limited to just 3 months off. It’s nice to be able to spend that time with her and not have to worry about daycare I’m sure.

  3. These costs really are getting out of control. I’m 60 so it has been ~40 years since I earned my undergrad degree. I think my parents paid about $3500 per year to send me to a Top 25 out of state public university. My daughter turned 20 yesterday and is in her Sophomore year at another Top 25 out of state Public University.

    Her tuition is running us about $50K per year. Fortunately, we started a 529 shortly after she was born and contributed $800/mo. up until it was time for her to start school. She started with over $300K in the fund which will cover her undergrad and her grad program down the road.

    Costs are a factor of supply and demand. When these costs become prohibitive, I think a few things could happen. One, people will send their kids to junior college for the first 2 years and then let them transfer to a better school so they only incur the biggest cost bite in the last 2 years. Second, online programs will skyrocket and start to eat into admissions of the campus programs which should force them to bend the cost curve to become more competitive or put out their own online programs to compete. Third, the government may try and step in to address it, depending on which party is in control at some point in time in the future. Fourth, people begin to pre-pay for college when their child is born, to save significant dollars, which pre-determines where that child will go in the future. Either way, something has to give.

    1. Your daughter is very lucky that you took such an interest in her education and were able to save up $300k over the years – well done! I see tuition rates continuing to rise 3-5% annually as long as colleges can get away with it. I don’t think they will stop until they start to feel the pain of admissions dropping off once there aren’t enough people who can borrow what is needed to attend.

      You raise some great points about ways people might try to address the situation.

      Colleges have the advantage that they are offering a product that everyone believes they must have in order for their children to succeed.

      Thanks for stopping by and sharing your story and your thoughts!

  4. Our daughter is an only child and we decided on public vs private schools growing up so we could afford to put away money for college. Pushing her to take mostly AP or Honors courses (18 of 22 classes) in the Public High School was a big boost to the overall quality of the education she received, and somewhat neutralizing the benefits of private high schools without the associated costs.

    Congrats on your new found parenthood status. It is a true blessing and an amazing calling to be someone’s Daddy!

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