Kids started kindergarten next step college

Now that the kids have started kindergarten time to think about college.  Well you should have started at birth, but got to start somewhere.

The way I see it you have four options for college

1. Fund a 529 account
2. Invest is a tax-able account
3. Hope your kids get scholarships
4. Take our loans 

I am investing in 529 in my state.  Why? Well I believe there is a high probability my kids will go to college.  My wife and I both went to college and both our families has gone to college for generations.  Honestly growing up is wasn't if you are going to college; it was what college you will go too. A 529 provides many benefits

• State tax deductible (must be in the state you live. Check with your state)
• Fund run my Vanguard
• Grows tax free and comes out tax free if spend on school.(tuition, room & board, books)
• Has this cool thing called collegeinvest which is a list of companies with links that will donate 1%-5% of your purchase to your kid’s college fund.
• If they get scholarship or don't if they don't go then pay 10% penalty to take it out. Or I can roll it over to someone else

Each state is different with different roles.  Seek out help or start your reach.  https://www.collegeinvest.org/

On the path for FI we can't always just focus on ourselves, but make it easier on our future.  I worked hard to pay my way through college and I though it taught me the value of hard work.  It may have helped, but I don't want my kids berried in debt because I want to teach them a lesson.  I want my kids to feel accomplished by what they are learning and not have to worry about the debt they are creating.  We all know college is expensive and based on the Vanguard College saving calculator going to get a whole lot more expensive.  https://vanguard.wealthmsi.com/csp.php.

I am a curious people and I asked what other are doing for their kids.  Some say they haven't thought of it others say they are investing their money encase they don't go.  In some ways this is smart, but think about how much potential money is being left on the table and given to tax man.  Let assume I started today investing in the same account VTSAX index mutual fund $100 a month until they are in college 13 years. One kid in a 529 the other in a taxable fund. We will use an 8% return and exclude minimum to invest.   As you can see below the tax free growth 3,800 more 👀 than the taxed. The more you add the worst the difference looks.

Year	Savings @ 0%	Beginning Balance	Return @ 8%	Taxes @ 25%	Ending Balance	Beginning Balance	Return @ 8%	Ending Balance
1	$1,200	$0	$96	$24	$1,272	$0	$96	$1,296
2	1,200	1,272	198	49	2,620	1,296	200	2,696
3	1,200	2,620	306	76	4,050	2,696	312	4,207
4	1,200	4,050	420	105	5,565	4,207	433	5,840
5	1,200	5,565	541	135	7,170	5,840	563	7,603
6	1,200	7,170	670	167	8,873	7,603	704	9,507
7	1,200	8,873	806	201	10,677	9,507	857	11,564
8	1,200	10,677	950	238	12,590	11,564	1,021	13,785
9	1,200	12,590	1,103	276	14,617	13,785	1,199	16,184
10	1,200	14,617	1,265	316	16,766	16,184	1,391	18,775
11	1,200	16,766	1,437	359	19,044	18,775	1,598	21,573
12	1,200	19,044	1,620	405	21,459	21,573	1,822	24,594
13	1,200	21,459	1,813	453	24,018	24,594	2,064	27,858

Scholarship are a great way to do it, but you can't count on getting them or the motivation to apply.

To use as a base for how much college is going to be I used the vanguard calculator and used my wife's school as a starting point.  Out of state tuition, room and board in 13 years $367,540 for one kid. Same school in-state tuition $244,311.  How the market does will greatly affect how much you will cover.  The game here is not to over fund, but to hit the sweet spot where I can either have it all covered if the market averages an 8% gain and mostly paid for if the market 4-6%.

Now there are some trick you can do to get in-state tuition.  California for example you need to live in the state for 366 days before filing residency.   One of my wife friends did this. He went to a junior college for 2 years. During these two years he worked for the school year around and shared an apartment.  After finishing all his general ed courses transfer to a high profile in-state school 

There are other factors to consider here, but in general if you are able to help your kids get a jump start on school save now, save often, and do it tax-free. Good Luck and Enjoy.