Thoughtful Thursday: Fund

August 16, 2012

Thoughtful ThursdayFollowing last week’s discussion on using gifts that “belong” to children:

Several commenters brought up the topic of college funds and other money that is given to children. Since I didn’t mention any of that in my post, I thought I’d discuss it more explicitly this week.

I believe in college funds. I believe that if a family has the means, they should pay for their children’s educations. I did not have a college fund by the time I got to college, even though there could have been an ample fund if my parents had made different decisions over the years. I was pretty pissed about that in college. Now, 15 years after graduating, I’m mildly annoyed that my loans aren’t yet paid off.

A friend of ours does not believe in college funds. He chooses not to have college funds for his children, thinking that they can go to state colleges. He chooses to bring in less income than he could and to spend the family’s disposable income on hobbies and vacations; he gets a lot of flack from his savings-minded friends for those choices.

Burrito and Tamale have college funds, but due to the way that tax benefits are structured, we put most of our savings into our own retirement accounts. We have every intention of paying for their educations, and moving the money around as needed, but thanks to Uncle Sam it looks on paper like we prioritize ourselves over them.

Even though we haven’t put that much money in yet, the balance of their college funds is still higher than the sum of the gifts they have received in their lives. As far as I am concerned, the money that people have given them has gone to them. In fact, we tend to do sort of a matching system, because in addition to putting money in the college funds we tell the gift-givers that their money is going to specific purchases like big-ticket toys. Relatives seem to get more enjoyment out of their gifts being enjoyed immediately by the children rather than paying for one college textbook 16 years from now.

However, at the time the gifts are given, we actually take the money. It’s pretty amusing to see DH take cash from a toddler’s birthday card and put it in his wallet — but it’s only amusing because I know that they will get their due at the end of the year. I’ve known parents like the one that strongblonde described in her comment last week who have taken money intended for their children, not out of need but out of selfishness. I certainly don’t believe in that.

What’s your stance on college funds?

14 Responses to “Thoughtful Thursday: Fund”

  1. St. Elsewhere Says:

    Well, dear daughter can definitely rely on her parents (that is, us) to pay for her education through and through.

    I haven’t really done anything with the cash she has received over the last few months. It’s just lying in an envelope in one of the drawers. I am still not decided if I should put it in the bank or buy something of lasting use for her. But the gifted money aside, she already has financial policies in her name, given by her her grandparents and her father.

    Among other things that we want to offer our child(ren), financial safety does rank very very high. And that includes financial back-up for us as well so that we never need our children’s support on that aspect.

  2. Elizabeth Says:

    Thanks to generous scholarships plus my dad’s savings, I was debt-free when I graduated from college. My husband didn’t finish paying off his college debt until after we got married (and he was 35 at that time). However, he doesn’t believe in college funds because he had to work his way through so he thinks our kids should, too. His parents, though have set up a college fund for our kids! Go figure.

    When my sister’s husband died, leaving her with a 6-month-old, she was eligible for his social security benefits until she remarried, but her daughter continues to get a check until she turns 18. For a while my sister was living on $750 a month but she still saved every penny of my niece’s SS money.

  3. a Says:

    We haven’t done a college fund. As far as I can tell, my husband’s plan is to begin hiding all our assets a year or two before my girl graduates high school, so she’s eligible for financial aid. I’m hoping that involves me being able to retire, but I won’t actually be eligible yet.

    I do feel it is good for kids to worry about how to pay for college. It’s an introduction into the real world finances. I had help from my parents, sisters, and my aunts, but I also had work-study and scholarships and loans.

    My girl’s cash gifts usually end up being converted into savings bonds. She also has a cash stash in her bedroom. She also technically has a good sized money market account because interest rates are so crappy and she makes an excellent tax shelter.

  4. strongblonde Says:

    we have dedicated accounts for each of the kids for college, but haven’t done one of the state specific accounts yet. We have every intention to do so, but just have not *done* it yet. Part of me feels that might be limiting the kid to a state school…but it can be applied other places. I’m not sure why we’re dragging our feet.

    I had to take out student loans for my undergrad, but managed to make it out of grad school (MS and PHD) with minimal debt. we STILL have not paid off my undergrad loans, though, and i really don’t want that for our kids.

    the funny thing is that b and i were talking today about where to take money from for our new TV that we’re purchasing. he actually said, “we could take it from the kids’ accounts” and my mouth dropped open. he immediately said, “we’re not my parents, i know it will get put back next week.” i told him that i was VERY uncomfortable with that and that if the money could be replaced in a week, that just meant that we needed to wait a week to buy it.

  5. celiadelia Says:

    My husband got NO help in college. I got two thousand dollars. You can imagine how far that went. Our sons have college funds and we are paying for the whole thing. I don’t care if they go to Cambridge or Princeton or Bennington. We are a bit concerned because for various reasons we are going to send them to private school up through 8th grade and it is going to make it much more difficult to save for their college but it is extremely important to us that they not head into adulthood under a financial burden.

  6. I’m taking a page from my parents’ book. We grew up knowing we’d be paying 1/3 of our college expenses. So we had a vested interest in getting scholarships, factoring in cost when choosing a college, and doing well in our studies.

    I saw so many people during college who seemed to not care. Mom and Dad were paying no matter how well they did, so what skin off their back was it to party instead of study?

    I felt ownership of my education, and I want my children to, as well.

    Does your friend know how much state colleges cost these days?

  7. clumsykisses Says:

    I absolutely believe parents should pay if they can.

  8. Elana Kahn Says:

    I created funds for each of the kids after they were born and I put a little aside into it every month. Also, if they get birthday checks from family members, that goes in as well. There won’t be a ton of money in any of the accounts, but it will be something. We won’t have the money to pay for their college, especially not after paying for private school tuition for so many years, so a lot will go into loans. If a parent can pay then they should, but if not then the child will have to take up responsibility for it.

  9. ana Says:

    B has an account that I put money in that he got for gifts. We haven’t put anything into it yet ourselves, the plan is to divert the day care money into it once he starts public school. (also diaper money, once he’s potty trained, whichever comes first!) I specifically decided against the tax-free college savings plans because I’m strangely concerned about the kids either not going to college or getting scholarships & the money being trapped (or taken out with huge penalties).

    This reminds me, I need to set up an account for L.

    My sister and I both got scholarships that covered full tuition—I chose my school based on this. My parents fully paid room & board and incidentals. They paid most of med school with very little loans but, again, I chose a very affordable school specifically to limit debt. I paid back my parents & the loans immediately when I sold the condo I lived in for 200% of what we bought it for (my parents bought it). I don’t want my kids to rack up college debt, and I hope they choose their schools with finances in mind. I kind of like Lori’s take, above, on paying 2/3 or some other percentage so the kids are somewhat invested in their education. I don’t want them to have to work full time & not get to experience college life, but a work-study or some other part-time job (preferably getting experience that would be relevant…like in a science lab, computer lab, whatever they are into) would be OK. I don’t like the idea of kids choosing super-expensive schools & skating through with parents paying the whole way. I’m skeptical about the long-term ROI of a ‘big name” school.

    Such different responses, based a lot on our own experiences.

  10. Aryanhwy Says:

    My parents couldn’t afford to contribute much to my college payments, since my dad quit work to get his master’s when I was 7, and then from when I was 10-18 was in and out of jobs. However, I had a bank account from about age 6 or 7 that was in my name, and I was always encouraged to save on my own for college; money that I was given as gifts was put in there (I was of course allowed to spend some of it, but never spent all of it), and later in high school when I started babysitting, and then working at the fabric store, my paychecks went in there too. As a result, I had enough squirreled away that by taking summer classes and working 15-25 hours per week depending on my schedule, I was able to do my undergrad in 3 years instead of 4 and emerged debt free. There was one semester when I hung out with friends a lot since then they’d feed me ’cause I was working on $5/week for food, but I survived. I know my parents contributed as much as they could, but I honestly am not entirely sure that I would have wanted them to have paid for my education. I think it was very healthy for me to have grown up knowing that I should be putting money away for something far away and expensive (which, as an adult, is retirement…), and also trying to balance work and school commitments. It made me very efficient, both in terms of money and in terms of getting things done, and I’m very glad I had the opportunity for those lessons.

  11. Cat Says:

    Our children have college funds, but we should be putting more in than we are. Your comment about the tax rate makes me think that we should make sure we’re putting the money in the most lucrative place, regardless of what it’s ultimately intended to fund. All money that is given to them goes into their bank accounts.

  12. Now that we’re moving to a good school district, we’ve decided to keep on paying our daughter’s preschool tuition into her college fund once she goes off to kindergarten. Hopefully that will be enough for at least state school.

  13. Well, you don’t need college funds in France (or in Holland), education is free here… We do have a savings account for each son though, to which we make monthly payments.

  14. Mel Says:

    Our plan, knock on wood, is to pay for their college funds. Our parents did that for us, and it’s something we’d like to pass along to them. Though we haven’t really saved yet because we haven’t been in a position to save. We are starting to set money aside, but I assume that we will take the loan when the time comes and pay it back for them.

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