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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.)
  • Part-time job and/or side hustle
  • Parents home equity

College savings plan

In 5 years, the college will cost at least $50K annually, total 4 year college means we need as much as $200K. If we’re to apply for student loans, we will be looking at paying 5% to 7% interest rates. Since we made the conscious decision to invest in taxable account and only contribute minimally to 529 plan, we will have roughly $30K in 529 account (which I now realized I need to adjust further).

Btw, I use the college savings calculator from Savingforcollege.com to help me estimate the projected 529 college savings plan. And, for this research planning, I use the estimated costs from CollegeCalc.org. These could be helpful tools for you, if you want to do your research for your children’s college.

Enrolling 2026

In the above scenario, I think it makes sense to make the following plans for child A:

  • 1st Year Cost – covered partly from 529 ($25K) and federal student loans 50/50.
  • 2nd Year Cost – same as 1st year.
  • 3rd Year Cost – student work part-time and we cover 70% which is $35K.
  • 4th Year Cost – same as 3rd year.

Action today: From looking at this plan, I think we will have to increase 529 contribution from $300 (current) to $500 per month.

Action approaching college year: Pay from 529 plan for the first 2 years. Sell $70K worth of shares and move into age-based 529 account in good times before 2024.

529 plan / student loan: $50K

Enrolling 2030

Similarly, for child B, we can use the same plan but with an increased cost to ~$68K annually, total $270K.

  • 1st Year Cost – covered partly from 529 ($34K) and federal student loans ($34K) at 50/50.
  • 2nd Year Cost – same as 1st year.
  • 3rd Year Cost – student work part-time and we cover 70% which is $48K.
  • 4th Year Cost – same as 3rd year.

Action today: Increase 529 contribution from $100 (current) per month to $300. Even though we will likely to end up short on target depends on the rate of return in the next 10 years.

Action approaching college year: Sell nearly $96K worth of shares sometime between 2026 and 2028.

529 plan / student loan: $68K

Enrolling 2034

For child C, we again hope to use the same plan but the cost by then in 15 years would have become ~$85K annually, a staggering amount of $340K total.

  • 1st Year Cost – covered partly from 529 ($42K) and federal student loans ($42K) at 50/50.
  • 2nd Year Cost – same as 1st year.
  • 3rd Year Cost – student work part-time and we cover 70% which is $60K.
  • 4th Year Cost – same as 3rd year.

Action today: Increase 529 contribution from $50 (current) per month to $300. Even though we will likely to end up short on target since we are now short on contribution after saving for two older children.

Action approaching college year: Sell nearly $120K worth of shares sometime between 2030 and 2032.

529 plan / student loan: $85K

** Note the estimated costs of college mentioned is based on CollegeCalc.org for my own research only.

I am planning to rebalance our investments at least 2 years before enrollment to avoid any market downturn that might reduce the value of our college savings. Also, financial aid applications will look at tax documents that are filed for the year 2 years prior and could count capital gains as income. So, I should sell 2 to 3 years prior.

When time to move money to cash

If you have all your savings in a 529 plan, consider moving half of the holdings to a money-market fund within the 529 plan when the child enters high school. All money in equities is very risky and unlike a retirement account, there may not be enough time to wait out for the market to recover. At a minimum, by the child’s 16th birthday, start shifting funds in stocks to a more conservative investments or to savings account into cash as an option.

Pay expensive college for multiple kids

It’s been always my worry that we won’t save enough to pay for all three of our kids college and it looks like that is going to be our situation. We try our best but it is really a huge amount of cost we have to pay. We do value education highly; but even that I still think college education is so expensive. We are talking about just public in-state university here, it’s going to cost more than $800,000 for 3 as the costs increases year over year.

Even more troubling is the thought that each of the kids will have the burden of student loan each at the start of their adult life. If not on them, then as parents, we will have $200K of student loans on our shoulders after having sponsored a big portion already.

Look for creative ways to afford college

Despite all the years of saving efforts, we will likely to come up short. I think we should look for other creative ways to afford their college tuition. Specifically, some sort of side hustles we can do now with the kids to potentially add extra income.

What about your preparation for your children’s college education? How do you plan to finance it?

This is our first time. If you are ahead of us, what can you share that has worked for you and what lesson have you learned from your experience?

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