Sunday, May 17, 2009

College 'Bound'

In just a couple of months, I will find myself in the unenviable financial position of having two children in college at the same time.

Now, if you have put—or helped put—your children through college in recent years, you’ll have an appreciation for the impact of that statement. If your kids are younger—or if kids are not yet part of your household budget—well, let me just say you don’t have nearly as much time to get ready as you think you do.

First off, you don’t really know how much it’s going to cost. There’s the whole private-versus-public decision (the costs of the latter will be heavily influenced by your current state of residence), and even that decision can be driven by the field of study your graduate chooses to undertake. Each school has different policies (and costs) about things like meal plans, student vehicles, and even how the dorms are furnished.

But the worst of the variables is the sheer annual increase in tuition. My eldest, who will be a senior in the fall, will be presented (well, technically, I will be presented) with a tuition bill that is roughly 20% higher than the one she got just a couple of years ago. Talk about your moving targets!

Now, I said the worst of the variables was the increase in tuition, but a close second has to be the bite the market has taken from the money we had set aside in their 529 college savings programs (see my 2003 column on the experience, “IMHO: College ‘Education’”). At one point, I had hoped that those investments—in target-date funds before target-dates were “cool”—would grow enough to make up for some of our late start in saving for college (braces first, you know?). Now—well, you know what’s happened there. Despite that, I’m proud to say that the family CFO (and that’s not me) has figured out ways to increase our 529 savings without dipping into the retirement fund(s).

Savings Parallels

Still, as we’ve spent the past couple of months trying to figure out how we were going to pay for whatever college daughter No. 2 chose (and not a little time trying to prepare her for a financial fallback, just in case), I’ve seen any number of parallels between saving for college and saving for retirement.

There’s the uncertainty of the amount, the unknown impact of inflation and/or higher prices and, of course, the market’s “contribution.” As with retirement, there is a “target date” of sorts—one that can, at least in theory, be postponed, and one can certainly choose to adjust one’s choice(s) to accommodate financial realities as that date draws nigh. And, as with retirement, a lot of uncertain nights between the planning and the actualization of the event itself.

As it turns out, my two daughters, through their hard work and effort (spurred by their mother’s constant pressure to complete the applications and essays, and doubtless aided by their father’s gene pool contribution) have both managed to obtain academic scholarships that have made it possible for them to attend colleges that would, in all likelihood, otherwise have been beyond our means.

Ultimately, while we had done the right things, the right way, we had perhaps not done enough, or done the right things the right way soon enough. And while our daughters would have been able to go to college—and good colleges—regardless, as a father, I’m thrilled that they’ve been able to pursue this education at the schools they chose. Still, with one more at home to clear that hurdle (just two years hence), it’s been something of a financial wake-up call, a real college “education.”

Many retirement savers—including this one—may well find themselves in the same boat one day. Having done the right things the right way(s) for a long time, they could nonetheless one day find themselves coming up short due to any number of circumstances beyond their immediate control—and some choices that aren’t. Ask any parent; time has a way of slipping away from us, and tomorrow is always closer than it seems.

—Nevin E. Adams, JD

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