Setting Clear Investment Plan To Save For Kids College In Volatile Markets

The stock market downturn in the past 2 weeks serve as a good reminder that the stock market is risky and volatile. It’s not a wake up call per se because going into this type of investment we know all along that it always carry a high risk. But, we invest anyways because it provides the highest potential returns. However, as much as we make the informed decision to invest, it is important that we make as much of a plan about our investment strategy.

Invest for the long term

While I am not too overly concerned about this round of bear market or crash (although my total equities have just dropped $50K on paper), I think it’s still a good chance to reassess our financial goals. I intend to write down our plans in a way that we can stick to over the long term and note actions we need to take now as well as in the foreseeable future.

Plan an exit ahead of using the fund

Technically, I have as far as 24 years from retirement, but personally I would ideally prefer to retire in less than 10 years. For bear market that happens so often in every 3-5 years, we have to keep on riding out the market ups and downs and keep investing with the long term in mind. Plan an exit ahead of any need to use the investment fund.

Even though reaching my retirement age is still a long way to go, we are not that far off from having to cash out some of that savings to fund our first child’s college education. It’s coming up in the year 2026. And then 4 years after in 2030 our second child will go to college, and then 4 years later in 2034 our youngest child will also too.

Diversify investment types

Among different types of investments, I have to admit that we aren’t that well diversified. For example, we are currently not investing in real estate (other than our primary residence) at the moment, although we had done that in the past. It is a consideration and option down the road though. For now, just between stock market investment and cash in savings, that is probably how we will rebalance our asset allocations for the near future.

Ways to pay for kids college

I think it would be a dream if all our childrens’ college education are funded by scholarships. If not, the second best scenario would be subsidies from their employers, if they managed to land on any work-study type opportunities. Otherwise, we will most likely have to tap into a combination of our investment accounts with some student loans, if we don’t want to touch neither IRAs nor 401K which will be needed for retirement.

Below are several ways for students to afford college:

  • Scholarships and grants (and financial aid)
  • Employer subsidies
  • Work-study opportunities / paid internships
  • Student research positions
  • College savings / 529 plan
  • Parents savings / investments
  • Federal student loans
  • Parents retirement (IRA, 401K, etc.)

Read More »