Telling Kids about 529 plans

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jstage
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Telling Kids about 529 plans

Post by jstage »

Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
Admiral
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Re: Telling Kids about 529 plans

Post by Admiral »

jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
I think you can start to worry about this conversation in, oh, 10 years.
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jstage
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Re: Telling Kids about 529 plans

Post by jstage »

Admiral wrote: Wed Oct 13, 2021 9:48 am
jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
I think you can start to worry about this conversation in, oh, 10 years.
While I agree with you on this...we want to be transparent and organically talk about finances with our children as they grow up so they understand why/how we spend money in hopes of teaching them how to manage money well as well. So I know it seems far off, but its part of an overall picture and plays into how we'll talk about the rest of our family budget.
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KingRiggs
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Re: Telling Kids about 529 plans

Post by KingRiggs »

I just told them that if they held up their part of the bargain (working hard in school, staying out of trouble), I would hold up my part (trying to get them debt-free through their education).

A corollary to that was that they were getting their inheritance in the form of an education, and that anything left to them after I had fun in retirement would be gravy...
Advice = noun | Advise = verb | | Roth, not ROTH | | "Remember, there's always money in the banana stand." - George Bluth, Sr.
Soon2BXProgrammer
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Re: Telling Kids about 529 plans

Post by Soon2BXProgrammer »

jstage wrote: Wed Oct 13, 2021 10:03 am
Admiral wrote: Wed Oct 13, 2021 9:48 am
jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
I think you can start to worry about this conversation in, oh, 10 years.
While I agree with you on this...we want to be transparent and organically talk about finances with our children as they grow up so they understand why/how we spend money in hopes of teaching them how to manage money well as well. So I know it seems far off, but its part of an overall picture and plays into how we'll talk about the rest of our family budget.
this is a pretty good book.
https://www.amazon.com/Raising-Money-Sa ... 8&qid=&sr=
It is written by "Nords" ( https://the-military-guide.com/ ) and his daughter.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
Admiral
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Re: Telling Kids about 529 plans

Post by Admiral »

jstage wrote: Wed Oct 13, 2021 10:03 am
Admiral wrote: Wed Oct 13, 2021 9:48 am
jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
I think you can start to worry about this conversation in, oh, 10 years.
While I agree with you on this...we want to be transparent and organically talk about finances with our children as they grow up so they understand why/how we spend money in hopes of teaching them how to manage money well as well. So I know it seems far off, but its part of an overall picture and plays into how we'll talk about the rest of our family budget.
Your kids are, what, 4? Younger? There is ZERO point in discussing anything about your own finances until your kids are at least 12. Start with giving them an allowance and helping them save 25% of it. Budgeting is difficult for a child under 10.

There is no reason to have a discussion about 529 or college financing until they are in high school. Full stop. They should focus on working hard and being a good person, not money.
NYerinLondon
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Re: Telling Kids about 529 plans

Post by NYerinLondon »

I try to be transparent as well with my kids when it comes to investments. I have found that what they comprehend changes quite a bit from year to year. For example, they understood how a bank account worked at a relatively young age (say, at age 6 or 7). It took a bit longer to understand medium- to long-term savings in stocks, such as 529 or custodial brokerage account, respectively. I find repeated mini-conversations and briefly reviewing statements a couple of times a year to be helpful.
bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

I agree with the other posters. No need to have that conversation until college apps are on the horizon. Earliest I would think this is reasonable would be midway through high school.
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SmileyFace
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Re: Telling Kids about 529 plans

Post by SmileyFace »

How are they going to cover 25%? Are they going to work long hours (perhaps at the sacrifice of study time) or graduate straddled with high-interest debt? I don't believe that forcing them to have skin in the game helps in either direction - they will either be responsible and studious - or irresponsible regardless of how much debt theynhold in my opinion.
I had discussions with my kids in High School about getting them through college If they showed responsibiltiy and dedication to school. I also had discussions with them about college choices that I would be willing to pay for. I never guaranteed I was going to fully fund anything but ended up doing so. Fully Funded is a relative term. Does that inlcude Grad school?
treesinthewind
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Re: Telling Kids about 529 plans

Post by treesinthewind »

Let them think a $100 is a lot of money for as long as possible. Teach them about saving and investing using percentages once they learn about that in school (around 3rd or 4th grade). Give them an allowance and help them save, but let them blow it on whatever they want. Better to experience buyer's remorse over a $10 fidget spinner that is in the bargain bin for $1 six months later than on a fancy car when they are a young adult. Do NOT tell them any specific dollar amounts until they have context for what it means--probably in the mid to late teens when they have started working, or in fact any numbers you don't want the entire neighborhood knowing.
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greg24
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Re: Telling Kids about 529 plans

Post by greg24 »

Our extended family has not had a problem with the kids not trying hard, even with 529 funds available. They want to achieve on their own, they want to help their parents save money, they want to do their part, they want to compete with other kids their age.

If you do a good job raising them, you don't need to worry about the 529.

:sharebeer
Last edited by greg24 on Wed Oct 13, 2021 10:23 am, edited 1 time in total.
Admiral
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Re: Telling Kids about 529 plans

Post by Admiral »

bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

I agree with the other posters. No need to have that conversation until college apps are on the horizon. Earliest I would think this is reasonable would be midway through high school.
Sorry, but I think this is terrible advice. (Unsure if you are advocating this.) So, if the kids gets a 2.9 it's no money for you pal, you're on your own?

I would never attach paying for education to a GPA. Plenty of kids work as hard as they can and don't achieve some random level of grades set by... whomever.
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SmileyFace
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Re: Telling Kids about 529 plans

Post by SmileyFace »

bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

So if the child works real hard but lacks aptitude for some classes one semester and has a bad semester and can't pick up the costs themselves they are done? Off to work at McDonalds.
I don't like these hard and harsh rules. Luckily my kids were responsible enough without threats and did well on their own. My whole strategy was positive rather than punishing/negative reinforcement and it seemed to work well.
Last edited by SmileyFace on Wed Oct 13, 2021 10:28 am, edited 1 time in total.
Boglegrappler
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Re: Telling Kids about 529 plans

Post by Boglegrappler »

I'd not mention the 529 aspect of your support, unless there is some specific reason to do so. That is to say, why should it matter to them that the source of their tuition payments is a 529 plan vs you simply paying cash from your taxable accounts?

As far as the 25% skin in the game issue, if you're in the circumstance of being full-pay for whatever school your kids attend, there are more than a few where a quarter of the overall cost would be about $20,000 per year. There aren't many ways that teenagers can come up with $80,000. Even if you consider a school where the overall cost of attendance is say, $40,000, 25% of that is still 10k per year, which is quite a lot for a kid to come up with on his own.
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Re: Telling Kids about 529 plans

Post by tenkuky »

We are doing college applications right now :shock:
Did the direct import from IRS and no 529 disclosure was needed on FAFSA.
Thus far, haven't disclosed to teen that the 529 exists or the amount therein.
Just vague "let's see what the costs are". They are aware that there is zero need-aid coming.
Waiting to see what shakes out in terms of college acceptances and merit aid, then will bring it up sloooooowly :twisted:
Boglegrappler
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Re: Telling Kids about 529 plans

Post by Boglegrappler »

From the instructions for FAFSA
Investments also include qualified educational benefits or education savings accounts (e.g., Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans). For a student who does not report parental information, the accounts owned by the student (and/or the student’s spouse) are reported as student investments in question 41. For a student who must report parental information, the accounts are reported as parental investments in question 89, including all accounts owned by the student and all accounts owned by the parents for any member of the household
bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

SmileyFace wrote: Wed Oct 13, 2021 10:25 am
bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

So if the child works real hard but lacks aptitude for some classes one semester and has a bad semester and can't pick up the costs themselves they are done? Off to work at McDonalds.
I don't like these hard and harsh rules. Luckily my kids were responsible enough without threats and did well on their own. My whole strategy was positive rather than punishing/negative reinforcement and it seemed to work well.
I believe if they have a bad semester, the parents would cover the cost in the form of a loan to be repaid for that semester. In either case, commenting on the parenting techniques of others serve no purpose for the original question of when to inform the child. Also not sure how a humblebrag of one’s own parenting techniques serve to further the conversation either.
Soon2BXProgrammer
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Re: Telling Kids about 529 plans

Post by Soon2BXProgrammer »

tenkuky wrote: Wed Oct 13, 2021 10:27 am We are doing college applications right now :shock:
Did the direct import from IRS and no 529 disclosure was needed on FAFSA.
Thus far, haven't disclosed to teen that the 529 exists or the amount therein.
Just vague "let's see what the costs are". They are aware that there is zero need-aid coming.
Waiting to see what shakes out in terms of college acceptances and merit aid, then will bring it up sloooooowly :twisted:
was your AGI less then $50k?
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
tenkuky
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Re: Telling Kids about 529 plans

Post by tenkuky »

Boglegrappler wrote: Wed Oct 13, 2021 10:30 am From the instructions for FAFSA
Investments also include qualified educational benefits or education savings accounts (e.g., Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans). For a student who does not report parental information, the accounts owned by the student (and/or the student’s spouse) are reported as student investments in question 41. For a student who must report parental information, the accounts are reported as parental investments in question 89, including all accounts owned by the student and all accounts owned by the parents for any member of the household
AAAAARGH
I must have missed that.
It is already submitted.
Can I retract and add the info in?
Our EFC makes it impossible that adding in any amount changes anything. Already teen realizes "loan" is only option.
Would anyone suggest I find a way to change this, knowing it will make no difference?
AGI not < 50K
Admiral
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Re: Telling Kids about 529 plans

Post by Admiral »

tenkuky wrote: Wed Oct 13, 2021 10:27 am We are doing college applications right now :shock:
Did the direct import from IRS and no 529 disclosure was needed on FAFSA.
Thus far, haven't disclosed to teen that the 529 exists or the amount therein.
Just vague "let's see what the costs are". They are aware that there is zero need-aid coming.
Waiting to see what shakes out in terms of college acceptances and merit aid, then will bring it up sloooooowly :twisted:
You need to re-read the instructions. (I am also doing FAFSA now). 529 balances are included, they are just lumped in with "investments." If you do not disclose the balances of these (and other) accounts, and then get financial aid based on non-reporting, you will be in trouble.
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SmileyFace
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Re: Telling Kids about 529 plans

Post by SmileyFace »

bubbly wrote: Wed Oct 13, 2021 10:33 am
SmileyFace wrote: Wed Oct 13, 2021 10:25 am
bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

So if the child works real hard but lacks aptitude for some classes one semester and has a bad semester and can't pick up the costs themselves they are done? Off to work at McDonalds.
I don't like these hard and harsh rules. Luckily my kids were responsible enough without threats and did well on their own. My whole strategy was positive rather than punishing/negative reinforcement and it seemed to work well.
I believe if they have a bad semester, the parents would cover the cost in the form of a loan to be repaid for that semester. In either case, commenting on the parenting techniques of others serve no purpose for the original question of when to inform the child. Also not sure how a humblebrag of one’s own parenting techniques serve to further the conversation either.
No humblebrag - just trying to help the OP by offering a counterpoint to your suggestion. Regarding whether or not this side topic that you brought up is relevant to the original question or not - you brought it up - not me - so you have me confused.
silvergga
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Re: Telling Kids about 529 plans

Post by silvergga »

Kids are really smart today. When my girl was 7-8 years old, "Daddy, is college expensive?"

"Yes, honey."

Then she asked, "Have you started saving for it yet?"

She grasped the concept of savings early on!
bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

Admiral wrote: Wed Oct 13, 2021 10:22 am
bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

I agree with the other posters. No need to have that conversation until college apps are on the horizon. Earliest I would think this is reasonable would be midway through high school.
Sorry, but I think this is terrible advice. (Unsure if you are advocating this.) So, if the kids gets a 2.9 it's no money for you pal, you're on your own?

I would never attach paying for education to a GPA. Plenty of kids work as hard as they can and don't achieve some random level of grades set by... whomever.
This is pretty much how all sports and merit scholarships work.
fireman
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Re: Telling Kids about 529 plans

Post by fireman »

Our children are much older w/ the oldest approaching college in a couple years. We tell them more and more as appropriate for their age and interest. For example, a junior in high school understands and is much more interested in this than, say, a first grader.

We base things off the the cost to attend the most expensive state school in our state (e.g., $30K or so). This helps me be fair when accounting for college inflation between the oldest and the youngest. Our goal is to be able to pay for 100% of the cost of attending this state school for each child. However, we only offer to cover 50% of this amount for each child and will "loan" the remaining 50% to each child. Terms of this "loan" could be, for example, 0% interest until 2 years after graduation. If all goes well, we intend to fully forgive this "loan." Not perfect but this is our attempt to make sure each of child has skin in the game. We think this is important when choosing a college and while attending the college.

If someone gets a scholarship, we will give what we were going to give to them as a cash gift (for example, after they graduate). Any leftovers in 529 plans will be held for future grandchildren.
Admiral
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Re: Telling Kids about 529 plans

Post by Admiral »

bubbly wrote: Wed Oct 13, 2021 10:50 am
Admiral wrote: Wed Oct 13, 2021 10:22 am
bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

I agree with the other posters. No need to have that conversation until college apps are on the horizon. Earliest I would think this is reasonable would be midway through high school.
Sorry, but I think this is terrible advice. (Unsure if you are advocating this.) So, if the kids gets a 2.9 it's no money for you pal, you're on your own?

I would never attach paying for education to a GPA. Plenty of kids work as hard as they can and don't achieve some random level of grades set by... whomever.
This is pretty much how all sports and merit scholarships work.
That's great. We are speaking of the parents, not the institution.
mikejuss
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Re: Telling Kids about 529 plans

Post by mikejuss »

One word: don't.
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phinanciallyfit
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Re: Telling Kids about 529 plans

Post by phinanciallyfit »

Knowing that there is money set aside for college (not the specific amounts) can help kids recognize the expectation that they go to college. There have been studies on this, but I think they were more focused on lower income folks. The amount of money in the 529s in those studies was low, but kids with a 529 were more likely to go to college than kids who didnt have a 529 (the control group, it was random assignment).

My kids will not likely have a fully funded 529, but if their scholarships cover their full tuition than they can use the 529 money as they wish. There is a 529 rule that funds can be withdrawn, without penalty, for the amount equivalent to any scholarships the kids get. To me, this is the skin in the game and I will share it with my kids as they get older.
phinanciallyfit
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Re: Telling Kids about 529 plans

Post by phinanciallyfit »

jstage wrote: Wed Oct 13, 2021 10:03 am
Admiral wrote: Wed Oct 13, 2021 9:48 am
jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
I think you can start to worry about this conversation in, oh, 10 years.
While I agree with you on this...we want to be transparent and organically talk about finances with our children as they grow up so they understand why/how we spend money in hopes of teaching them how to manage money well as well. So I know it seems far off, but its part of an overall picture and plays into how we'll talk about the rest of our family budget.
FWIW, my oldest is 7 and is well aware of her 529. As of now, the only contributions have been her own money (gifts to her). I have shown her graphs of how it grows and to encourage her continuing to opt to put gift money there rather than to buy random stuff. When she was 5, she actually had some earned income. It was only a few hundred dollars, so I didnt want to deal with the hassle of opening a Roth for her. I gave her a choice of holding onto it in here bank account where she could access it, buying what she wanted, or putting it into her 529. She opted for the 529. Young kids can understand this far better than folks give them credit.
sureshoe
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Re: Telling Kids about 529 plans

Post by sureshoe »

I literally just yesterday mentioned this to my 11 year old. I don't see a point in going super-deep into your finances with kids who really don't grasp the difference between $1k, $100k, and $1M.

We were talking sports and academic scholarships, and I mentioned we have a lot of money saved for college, and if he can get a scholarship, I'd use that money to buy him a house or set up an account or whatnot.

In general, about this age I think it makes sense to introduce this, because grades and standardized tests are starting to matter.
stoptothink
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Re: Telling Kids about 529 plans

Post by stoptothink »

Our kids are 9 and 6, 529s cover 4yrs at local U (at current costs) and we are done contributing. Nobody on either side of our family has ever received parental financial help for college and wife and I tend to agree with the "skin in the game" crowd. We don't yet have a plan as to when and how we'll let them know about the fund, but probably not before they get to high school.
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Re: Telling Kids about 529 plans

Post by Vulcan »

jstage wrote: Wed Oct 13, 2021 9:43 am Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
Pre-school is not the time to have college conversations, financial or otherwise.

At this age kids should be developing the love of learning for the sake of learning. It will serve them well on the long road ahead.

College finance conversations can be had later on, when it's about time to start putting together colege lists (HS junior year).

There are different schools of thought on whether kids need to have financial "skin in the game" in funding their education. I suppose good arguments exist in favor of each, and it may depend on the child. Our kids know that our goal is for them to graduate debt-free. They have enough "skin in the game" with their future on the line as it is.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Telling Kids about 529 plans

Post by Vulcan »

jstage wrote: Wed Oct 13, 2021 10:03 am
Admiral wrote: Wed Oct 13, 2021 9:48 am I think you can start to worry about this conversation in, oh, 10 years.
While I agree with you on this...we want to be transparent and organically talk about finances with our children as they grow up so they understand why/how we spend money in hopes of teaching them how to manage money well as well. So I know it seems far off, but its part of an overall picture and plays into how we'll talk about the rest of our family budget.
Kids will see what you spend and do not spend the money on.

Our elder already knew that his classmates being picked up in newer luxury vehicles and living in larger homes in more expensive part of town are receiving a lot larger finaid packages, so it came as little surprise to him, when it came time to disclose our finances on the 2nd year FAFSA/CSS, that we are in a two comma club in our 40ies despite (or thanks to) living in a modest house and driving 20 year old cars.

Until then, you can reassure them along the way that you are prioritizing long-term goals like your financial security and their college education over short-term indulgences - if that is what you are indeed doing.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

Admiral wrote: Wed Oct 13, 2021 11:09 am
bubbly wrote: Wed Oct 13, 2021 10:50 am
Admiral wrote: Wed Oct 13, 2021 10:22 am
bubbly wrote: Wed Oct 13, 2021 10:14 am Friend of mine had their parents give them a gpa requirement for college. Basically, above a 3.0 gpa, the parents would cover that semester of school. I believe he was informed of it during the initial stages of the college application process, so around junior year or so?

I agree with the other posters. No need to have that conversation until college apps are on the horizon. Earliest I would think this is reasonable would be midway through high school.
Sorry, but I think this is terrible advice. (Unsure if you are advocating this.) So, if the kids gets a 2.9 it's no money for you pal, you're on your own?

I would never attach paying for education to a GPA. Plenty of kids work as hard as they can and don't achieve some random level of grades set by... whomever.
This is pretty much how all sports and merit scholarships work.
That's great. We are speaking of the parents, not the institution.
I guess I am of the opinion that it’s better to acclimate the child to the rules and requirements of the institution ahead of time. Sure you might find the gpa requirement arbitrary, but they’re a prereq for competitive entry level jobs, scholarships, graduate school, etc.

I did not come from a wealthy family and had to take out significant loans to fund my undergrad. My graduate school was covered by the university’s teaching assistantship, which was a full time job in and of itself. I see parents paying for college as a luxury not afforded to most children. Most students in the US take out loans to fund their college. If a parent/parent(s) is/ are paying for it, then there should be certain requirements attached for that financial burden. After all, this is a financial forum.

It seems lopsided to think this forum has a problem from a financial POV with several thousands of dollars in investment fees annually but no issue with spending 50k a semester on a child’s college education if that child is performing poorly in college.
fourwheelcycle
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Re: Telling Kids about 529 plans

Post by fourwheelcycle »

It's a bit early to be contemplating this question. Perhaps when your children are in 9th grade, or when they first bring up the topic of college on their own, you could say what my father told me, and what my wife's father told her: I want you to focus on your education. Don't worry about how you will pay for college. I will pay the cost for any college you get into and choose to attend.

Our parents weren't wealthy. They were probably barely above the level where they could have applied for financial aid, but they valued education.
Normchad
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Re: Telling Kids about 529 plans

Post by Normchad »

I told my kid when she was in middle school that I had enough saved up for 4 years at an in state public school, about $100K.

Then I told her it was for her college, but if she didn’t need all of it for college, she could use any leftover funds for a house down payment or wedding, etc. She immediately starting referring to the 529 plan as her “Ferrari fund”.

So she was very motivated in high school to get good grades and college scholarships. She dominated high school. Accepted a full tuition scholarship.

She has graduated from college now, and basically has about $100K in her taxable investment accounts…..
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Re: Telling Kids about 529 plans

Post by marcopolo »

jstage wrote: Wed Oct 13, 2021 9:43 am Hello,

I'm hoping to lean on the input of those with older children/more wisdom. My children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.

If you have paid for your children's college how did you go about navigating this? We have considered dialing back what we save so they need to cover at least 25% as well. Our kids are in pre-school so we have quite a bit of time to save more/less and haven't engaged in this conversation with them yet.
We felt that the fact that their future career is largely dependent on how well they do in school was enough "skin in the game" to motivate them. No need to add financial pressure on top of that just for that purpose.
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Flashes1
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Re: Telling Kids about 529 plans

Post by Flashes1 »

I told my kids in middle school that if they did poorly in school they would go to the local community college (they know only the idjots in their school go there), but if they do well, then 4-years at any college is paid for.

Scared straight.
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JoeRetire
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Re: Telling Kids about 529 plans

Post by JoeRetire »

jstage wrote: Wed Oct 13, 2021 9:43 amMy children will have a fully funded college education as a combination of our 529 and a 529 that their uncle has built. My question is how do I share this information with them? What I mean is I want to strike a balance between them "having skin in the game" and taking HS seriously/striving for scholarships, etc. but also have them know that their needs will be met.
If you are afraid they won't work hard, you could withhold the information from them.

We always told our children that we would pay for their college education, and they would pay for any "extras" like cars, food, trips, etc. We did, and they did.

They never stopped working hard. Got a few small scholarships. Held jobs throughout their high school and college years. Graduated debt-free. They are now successfully on their own with families of their own, and are funding 529 Plans for their children.
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SmileyFace
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Re: Telling Kids about 529 plans

Post by SmileyFace »

bubbly wrote: Wed Oct 13, 2021 12:21 pm If a parent/parent(s) is/ are paying for it, then there should be certain requirements attached for that financial burden.
I agree with this statement but disagree on tying an arbitrary GPA to it. For me it's about effort and responsibility. The problem is not everyone is born with the same aptitude. The institutions can easily discourage a struggling student from seeking a higher education because they simply don't have the aptitude for high grades across the board - but that doesn't mean I am going to do that as a parent.
I recognized pretty early in parenthood that my kids weren't all equal. One could get all A's with barely any effort while another works really really hard to maintain B's and occasionally slips into a C. Ironically the A student gets into more problems and is less responsible. If the hard working, lower aptitude student wants to attend college (rather than go straight to a job or trade school) do I not let him do so on my dime? Do I have him pay for it himself while fully funding his reckless but easy-A-obtaining brother? My struggling student will have enough struggles in life that I chose not to start him off with more debt than his nonstruggling brother. All children are different. It's best to get to know your children and adapt than to set hard/fast rules that apply regardless. Maybe if all your children are super smart your GPA rule will work as a base-system to help them from slipping into complete irresponsibility.
milktoast
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Re: Telling Kids about 529 plans

Post by milktoast »

We always talked to our kids as if they would go to college.

When they got a little older and asked about money we said that we would make sure they could afford college, but they would need to well in school so they could pick the university that suits them best.

Then in high school, we started talking about we would definitely pay for college but if they wanted to go somewhere fancy they would have to get a scholarship to cover some of the costs because college is expensive.

Then when we actually looked at colleges with them, we talked about the cost along with the environment, reputation, fit, etc. as part of the decision criteria. One kid goes to private university, but earned a merit scholarship to help with costs. And the other goes to public university. Both are happy with their choices.

Cost wasn't a deciding factor in either case, but they know money isn't free.
bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

SmileyFace wrote: Wed Oct 13, 2021 12:53 pm
bubbly wrote: Wed Oct 13, 2021 12:21 pm If a parent/parent(s) is/ are paying for it, then there should be certain requirements attached for that financial burden.
I agree with this statement but disagree on tying an arbitrary GPA to it. For me it's about effort and responsibility. The problem is not everyone is born with the same aptitude. The institutions can easily discourage a struggling student from seeking a higher education because they simply don't have the aptitude for high grades across the board - but that doesn't mean I am going to do that as a parent.
I recognized pretty early in parenthood that my kids weren't all equal. One could get all A's with barely any effort while another works really really hard to maintain B's and occasionally slips into a C. Ironically the A student gets into more problems and is less responsible. If the hard working, lower aptitude student wants to attend college (rather than go straight to a job or trade school) do I not let him do so on my dime? Do I have him pay for it himself while fully funding his reckless but easy-A-obtaining brother? My struggling student will have enough struggles in life that I chose not to start him off with more debt than his nonstruggling brother. All children are different. It's best to get to know your children and adapt than to set hard/fast rules that apply regardless. Maybe if all your children are super smart your GPA rule will work as a base-system to help them from slipping into complete irresponsibility.
I guess this is where a culture difference is magnified. I come from a cultural background that getting a high gpa simply required more hard work and dedication. Sure there were naturally bright students but for every 1 of those, I saw 5 that simply studied more or prepped harder (I made up the ratio: the actual breakdown is not important).

The other thing to consider is that if I had the means, I would always fund the child’s college but the repayment requirements would be based on gpa so no child would actually be denied a chance to attend college. They would have to repay me back at 0% interest rather than to a governmental or private lender if their grades slipped. As time goes on and you see an honest attempt in maintaining academics or career, you can easily forgive the rest of the debt they owe since the loan resides between you and the child. I believe my friend’s parents forgave the one semester of tuition/fees where his grades dropped after he landed a job at an sp500 company straight out of college. Ultimately it’s not about raw gpa but their career trajectory post college but there isn’t any good indicator of post college trajectory other than gpa. You use the best indicator you have. However flawed it may be, at least it’s not subject to emotion.

One thing I recognize I did not consider is if a child has a learning disability. This is different and I would not base his/her performance on raw GPA. I am not sure how I would approach this because this scenario has completely changed. I have not given much thought but I think I would do everything financially possible for that child to pursue their educational aspirations.
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Re: Telling Kids about 529 plans

Post by lazynovice »

It would have been very hard for us to teach our kids about saving and investing if they thought we were not saving and investing for one of the largest expenditures in our lives.

They didn’t get scholarships because they went to a school that was hard to get into and offers virtually no merit aid. It was an inexpensive school. We told them they could go to more expensive schools but would need to cover the gap with scholarships.

Their “skin in the game” in college was getting the grades and internships needed for grad school and employment post graduation.
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Re: Telling Kids about 529 plans

Post by marcopolo »

lazynovice wrote: Wed Oct 13, 2021 1:48 pm It would have been very hard for us to teach our kids about saving and investing if they thought we were not saving and investing for one of the largest expenditures in our lives.

They didn’t get scholarships because they went to a school that was hard to get into and offers virtually no merit aid. It was an inexpensive school. We told them they could go to more expensive schools but would need to cover the gap with scholarships.

Their “skin in the game” in college was getting the grades and internships needed for grad school and employment post graduation.
Exactly my thinking.

For parents that have the ability to fully fund college expenses, what benefit is there to saddling your kids with lots of college debt?

If the difference in career paths, and life time earnings between college grads and non- college grads is not enough "skin in the game", is a some additional debt on top of that really going to make a difference?

Do you then pay the debt off for them at some point, or let them spend the next ten years struggling with it, only to inherit millions when they are 60 years old?
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Telling Kids about 529 plans

Post by TurtleBeatsHare »

I’m in a similar boat. My current thinking is to tell my kids when they are in...maybe middle school and are beginning to think about college...that their mother and I have been saving money diligently for them to attend. I think this is a teaching opportunity to reinforce several useful life lessons—like the value of LBYM, the value of planning in advance, the value of saving for extended periods of time to prepare for a better future. I don’t have any well developed thoughts yet about sharing, but I expect that I will do something like a cost match—for every dollar that they earn and contribute to their tuition, I will match X dollars. I think it’s important that people feel the cost of their schooling when they are attending, and not hide the cost until it’s too late to avoid it. I’m especially worried about how many children get useless majors for high cost or get majors that don’t apply to their career—which is something like 75% of the time last I checked. It’s likely that I’ll also tell my children that their first major has to be valuable. If they want a fun or fulfilling major, they can double major.
Normchad
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Re: Telling Kids about 529 plans

Post by Normchad »

TurtleBeatsHare wrote: Wed Oct 13, 2021 2:21 pm I’m in a similar boat. My current thinking is to tell my kids when they are in...maybe middle school and are beginning to think about college...that their mother and I have been saving money diligently for them to attend. I think this is a teaching opportunity to reinforce several useful life lessons—like the value of LBYM, the value of planning in advance, the value of saving for extended periods of time to prepare for a better future. I don’t have any well developed thoughts yet about sharing, but I expect that I will do something like a cost match—for every dollar that they earn and contribute to their tuition, I will match X dollars. I think it’s important that people feel the cost of their schooling when they are attending, and not hide the cost until it’s too late to avoid it. I’m especially worried about how many children get useless majors for high cost or get majors that don’t apply to their career—which is something like 75% of the time last I checked. It’s likely that I’ll also tell my children that their first major has to be valuable. If they want a fun or fulfilling major, they can double major.
Seems reasonable. Be flexible and see how it plays out. My kid also wanted a major that I wasn’t crazy about. So we talked it out and agreed that she’d also major in something more employable. Although truth be told, I couldn’t control it. Since she was on a scholarship, I really couldn’t force anything, other than withholding spending money.
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Re: Telling Kids about 529 plans

Post by bubbly »

marcopolo wrote: Wed Oct 13, 2021 2:07 pm
lazynovice wrote: Wed Oct 13, 2021 1:48 pm It would have been very hard for us to teach our kids about saving and investing if they thought we were not saving and investing for one of the largest expenditures in our lives.

They didn’t get scholarships because they went to a school that was hard to get into and offers virtually no merit aid. It was an inexpensive school. We told them they could go to more expensive schools but would need to cover the gap with scholarships.

Their “skin in the game” in college was getting the grades and internships needed for grad school and employment post graduation.
Exactly my thinking.

For parents that have the ability to fully fund college expenses, what benefit is there to saddling your kids with lots of college debt?

If the difference in career paths, and life time earnings between college grads and non- college grads is not enough "skin in the game", is a some additional debt on top of that really going to make a difference?

Do you then pay the debt off for them at some point, or let them spend the next ten years struggling with it, only to inherit millions when they are 60 years old?
To me, it’s a matter of delaying my retirement for the benefit of my child not having to pay for their education. Sure if I had a 10 mil+ portfolio, I would not hesitate to pay for their education but if that 150-200k per child meant retiring years earlier, then I’d want to see some indication that my child is earning what they get. Like I mentioned previously, I did not grow up with much wealth and a sum of a 200k investment will always be scrutinized by me, even if it was spent on my child.

The gpa requirement I mentioned is just something that makes sense to me. It may not make sense to others. For me, I would never pay for the tuition of a major I found to be worthless. In the same vein, I find that below b average gpas closes many doors for college graduates. In that regard, the value of that college degree is diminished and the cost of the tuition should be born somewhat by my child.
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Re: Telling Kids about 529 plans

Post by marcopolo »

bubbly wrote: Wed Oct 13, 2021 3:27 pm
marcopolo wrote: Wed Oct 13, 2021 2:07 pm
lazynovice wrote: Wed Oct 13, 2021 1:48 pm It would have been very hard for us to teach our kids about saving and investing if they thought we were not saving and investing for one of the largest expenditures in our lives.

They didn’t get scholarships because they went to a school that was hard to get into and offers virtually no merit aid. It was an inexpensive school. We told them they could go to more expensive schools but would need to cover the gap with scholarships.

Their “skin in the game” in college was getting the grades and internships needed for grad school and employment post graduation.
Exactly my thinking.

For parents that have the ability to fully fund college expenses, what benefit is there to saddling your kids with lots of college debt?

If the difference in career paths, and life time earnings between college grads and non- college grads is not enough "skin in the game", is a some additional debt on top of that really going to make a difference?

Do you then pay the debt off for them at some point, or let them spend the next ten years struggling with it, only to inherit millions when they are 60 years old?
To me, it’s a matter of delaying my retirement for the benefit of my child not having to pay for their education. Sure if I had a 10 mil+ portfolio, I would not hesitate to pay for their education but if that 150-200k per child meant retiring years earlier, then I’d want to see some indication that my child is earning what they get. Like I mentioned previously, I did not grow up with much wealth and a sum of a 200k investment will always be scrutinized by me, even if it was spent on my child.

The gpa requirement I mentioned is just something that makes sense to me. It may not make sense to others. For me, I would never pay for the tuition of a major I found to be worthless. In the same vein, I find that below b average gpas closes many doors for college graduates. In that regard, the value of that college degree is diminished and the cost of the tuition should be born somewhat by my child.
That is why i started my comment with the phrase: For parents that have the ability to fully fund college expenses.

As far as setting GPA requirements. I think a hard cutoff is generally a bad idea for the same reasons others have stated above. A more flexible, "perform well in college" might be more reasonable. But, again, if the difference in future prospects is not enough to motivate the student, I am skeptical adding more financial pressure is going to make a significant difference.
Once in a while you get shown the light, in the strangest of places if you look at it right.
stoptothink
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Re: Telling Kids about 529 plans

Post by stoptothink »

bubbly wrote: Wed Oct 13, 2021 3:27 pm
marcopolo wrote: Wed Oct 13, 2021 2:07 pm
lazynovice wrote: Wed Oct 13, 2021 1:48 pm It would have been very hard for us to teach our kids about saving and investing if they thought we were not saving and investing for one of the largest expenditures in our lives.

They didn’t get scholarships because they went to a school that was hard to get into and offers virtually no merit aid. It was an inexpensive school. We told them they could go to more expensive schools but would need to cover the gap with scholarships.

Their “skin in the game” in college was getting the grades and internships needed for grad school and employment post graduation.
Exactly my thinking.

For parents that have the ability to fully fund college expenses, what benefit is there to saddling your kids with lots of college debt?

If the difference in career paths, and life time earnings between college grads and non- college grads is not enough "skin in the game", is a some additional debt on top of that really going to make a difference?

Do you then pay the debt off for them at some point, or let them spend the next ten years struggling with it, only to inherit millions when they are 60 years old?
To me, it’s a matter of delaying my retirement for the benefit of my child not having to pay for their education. Sure if I had a 10 mil+ portfolio, I would not hesitate to pay for their education but if that 150-200k per child meant retiring years earlier, then I’d want to see some indication that my child is earning what they get. Like I mentioned previously, I did not grow up with much wealth and a sum of a 200k investment will always be scrutinized by me, even if it was spent on my child.

The gpa requirement I mentioned is just something that makes sense to me. It may not make sense to others. For me, I would never pay for the tuition of a major I found to be worthless. In the same vein, I find that below b average gpas closes many doors for college graduates. In that regard, the value of that college degree is diminished and the cost of the tuition should be born somewhat by my child.
To many, a parent-funded college education is simply a right. My kids will be the first on either side of the family to get ANY financial help with college (and there are 9 college graduates between my wife's siblings and mine). My wife was totally against saving for or even paying for any of their college at all until the last few years, when she actually finished school herself (working full-time the entire way through) and we hit some financial milestones. We don't have any definite plans now, but I'd honestly be shocked if my wife was OK continuing to drain the 529 unless they met some guidelines (good grades, probably a part-time job).
bubbly
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Re: Telling Kids about 529 plans

Post by bubbly »

marcopolo wrote: Wed Oct 13, 2021 3:48 pm
bubbly wrote: Wed Oct 13, 2021 3:27 pm
marcopolo wrote: Wed Oct 13, 2021 2:07 pm
lazynovice wrote: Wed Oct 13, 2021 1:48 pm It would have been very hard for us to teach our kids about saving and investing if they thought we were not saving and investing for one of the largest expenditures in our lives.

They didn’t get scholarships because they went to a school that was hard to get into and offers virtually no merit aid. It was an inexpensive school. We told them they could go to more expensive schools but would need to cover the gap with scholarships.

Their “skin in the game” in college was getting the grades and internships needed for grad school and employment post graduation.
Exactly my thinking.

For parents that have the ability to fully fund college expenses, what benefit is there to saddling your kids with lots of college debt?

If the difference in career paths, and life time earnings between college grads and non- college grads is not enough "skin in the game", is a some additional debt on top of that really going to make a difference?

Do you then pay the debt off for them at some point, or let them spend the next ten years struggling with it, only to inherit millions when they are 60 years old?
To me, it’s a matter of delaying my retirement for the benefit of my child not having to pay for their education. Sure if I had a 10 mil+ portfolio, I would not hesitate to pay for their education but if that 150-200k per child meant retiring years earlier, then I’d want to see some indication that my child is earning what they get. Like I mentioned previously, I did not grow up with much wealth and a sum of a 200k investment will always be scrutinized by me, even if it was spent on my child.

The gpa requirement I mentioned is just something that makes sense to me. It may not make sense to others. For me, I would never pay for the tuition of a major I found to be worthless. In the same vein, I find that below b average gpas closes many doors for college graduates. In that regard, the value of that college degree is diminished and the cost of the tuition should be born somewhat by my child.
That is why i started my comment with the phrase: For parents that have the ability to fully fund college expenses.
I should have been more clear in my delaying retirement statement. Even with the expenses of college, I will still be on track to retire slightly early. But without that expense, I could retire earlier. It’s all relative for me and if I’m giving up on years of retirement, then I want to see my kid earn it.
lazynovice
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Re: Telling Kids about 529 plans

Post by lazynovice »

I cannot imagine majoring in something because my parents told me to. And then having to make a career out of it. Ugh.

But I think a student owes the parent a plan of how majoring in X will result in gainful employment post-college or post-grad and some evidence that they understand what they are setting themselves up for.

Do Liberal Arts majors get jobs? Yes. In an Ivy League school they get jobs in big time consulting. From your Directional State University? You better check on that.
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