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How Much Should Parents Be Saving for Their Kid's College Fund?

Monday, April 1, 2013

The answer I received from a MassMutual Financial Adviser surprised me--it depends on each family's financial situation.

Like all moms I want to make sure that my son and daughter can pay for their higher education and I have been feeling guilty for not having college funds already set up. But according to Court Creeden, a Financial Representative with MassMutual, putting $50-$100/month into a college savings plan without looking at the big picture is not the best way to secure my children's future.

The big picture means figuring out if you are in a place to save for college right now. Do you have outstanding liabilities like credit card debt with high interests rates? Are you contributing enough in your retirement account? Do you have the necessary life and disability insurance to cover expenses in case of an unexpected tragic event? Is your emergency savings enough? If the answer is no, then you are best served holding off on the 529 plan until your financial house is in order.

If this sounds backwards to you, then welcome to the club. I am from the school of thought that puts my kids first even if it means I have to sacrifice what I want. But after talking to Court my attitude changed a bit (at least when it comes to finances. I am still giving my kid a kidney if s/he needs it).

Court says the best thing parents can do for their kid's future is to be financially fit themselves. He used a pretty effective analogy to illustrate this point. On a plane you are instructed to secure your oxygen mask first in the event of an emergency before you help your child. Makes sense, right? The last thing your child needs is for her parents to wind up living in their car so she can graduate from law school. As Court put it, "there are no loans and scholarships for retirement."

With so many competing priorities, it's hard to know where to begin. You could try guesstimating a financial plan and get most of it wrong or a better idea would be to sit down with a professional financial adviser who will take the guesswork out of the equation and help parents come up with the right financial formula for their family. Take this cool quiz to learn about your financial personality and get useful tips on becoming more financially savvy. My results indicate that I am a "knowledge craver," someone with the desire to take charge of my family's finances, but who feels there isn't enough time.

This is the year my husband and I recommit to our financial plan. We had one before the kids were born, but it hasn't been updated or followed in a long time. I would like to become more involved in the process, even in a small way and I am going to make that my goal.

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Disclosure: I wrote this post as participation in in a blog tour for Mom Central on behalf of MassMutual and received compensation in the form of an Amazon gift code to thank me for taking the time to participate.


Momma Told Me said...

I'm a 'successful planner,' but I'm sure there is always more I could be doing!

Suburban Style Challenge said...

You know, I wish that financial planning were a gen ed requirement for all students in college. It would make SO much more sense!

Mama Up! said...

A lot of places now advocate for getting your own house in order (incl. retirement planning) before worrying about college 18 years down the line.

Mina Slater said...

I was shocked when I learned that putting kiddo first (in this aspect) wasn't the best way too. Now that I've turned things around I see why it's important to make sure my finances are in order before concentrating on additional things. Plus like my father reminded me, there are grants, scholarships & other types of financial aid for school.

Cinny said...

It's expensive and my parents helped pay for my postgrad too so I owe them a ton!

Unknown said...

I think you are right. The best we can do is be financial fit first. Then worry about education. I come from a different type of background. My parents didn't pay for my college. Nor were they expected to. in our culture, it is expected that we all do our best to get a job and save up for college, work between semesters and use Pell grants and student loans to get through college. Now, my parents helped me with food from time to time when needed. They weren't opposed to helping me make it through month to month with needs (not wants). But it really helped me appreciate and cherish my college time more because I put in the work for it.

Now, that doesn't mean I don't want to save up for my kid's education. we started secret savings accounts for each child. When we can, we put money in. I want it to be a surprise HS graduation gift. BUt still have them with the mindset that they need to be financially responsible to start earning themselves too.

But right now, the best we can do is make sure we are out of debt, and have a secure home to live in. That is more important for us right now.

Crunchy Frugalista said...

I love that you are talking about financial planning. I am such a dork when it comes to finances.

I love the quote "there are no loans for retirement." That's why my family decided to save for retirement and find other ways to fund our children's educations. We can't afford to do both, so that seemed to be the best decision for our family.

XOXO, Michelle said...

I completely agree, and we are taking steps to set up our finances properly before starting on the kids college funds. And I saw someone comment that this should be in a mandatory class somewhere. I agree, no one teaches money. I am fortunate to have access to a class on money and economics for kids here in Singapore called Kindernomics - which teaches most of that starting from 4 years old! Good luck to all trying to get this sorted. It can be done! Cheers

Unknown said...

We recently met with a financial planner about getting our "house" in order. My husband and I have had to learn the hard way about being financially smart. I know we do plan on putting some money away for the kids towards college. But I am sure they will need to be responsible for most of it. Great discussion!

Jenn said...

We have a pretty good financial planner, but it is still challenging to figure out what to do with our funds and when it is right to invest in college funds.

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