The perfect is the enemy of the good. For a long time, the perfect kept me from opening a 529 account. I struggled with my reservations and uncertainties about making that type of commitment. College for my children seems so far away and 529 Plan was far, far down my list of financial imperatives. Still, the decision to start an account haunted me. I knew I was letting the perfect prevent me from making a good financial decision.
In my countless hours of debate over opening an account I came to a conclusion. If you are a parent, you should open a 529 plan for your children; period. I know that parents struggle with the wisdom in starting these plans, which is why I’m here to explain why you don’t have to worry.
Any parent wrestling over the merits of opening a 529 Plan has three basic concerns:
- What if my child doesn’t go to college, I’d be wasting money.
- Won’t I be robbing my own retirement by giving a large chunk of savings to my children?
- Saving too much could cost me in the end, it’s impossible to know how much to save.
While each of these considerations are important, they should not be deal breakers, nor should they prevent you from opening an account.
Odds are, Your Kid is Going to College
Of course not every child is going to attend college, but your child probably will. In fact, 3 out of 4 young adults complete at least some college. The odds only increase with your personal level of college completion. If you’ve graduated college, your children have an 87 percent chance of attending college. My wife and I have graduate degrees, our children have a 93 percent chance of heading to school.
Just to give you some perspective, your child is more likely to go to college than get married.
Don’t Prevent Others from Giving the Gift of College Savings
You aren’t the only person with an interest in sending your child to college. Grandparents, aunts, uncles and even your children have an interest in saving. Most 529 plans allow anyone to send contributions, which means you aren’t on your own. Even if you fear making your own contributions will put your retirement at risk, opening an account allows others to gift money over the years.
People can’t contribute if you never open an account.
You Probably Couldn’t Save Enough If You Tried
In an article I wrote for US News and World Report, I made an attempt at estimating the cost of college in 2030. Based on current tuition growth rates and assuming parents cover only 45 percent of the tuition bill, you’d need to save at least $100,000 per child. To meet this goal, you’d need to save roughly $215 a month. This is with your child receiving some financial aid and taking out nearly $80,000 in student loans.
The simple fact is that if college costs continue to grow at current rates, you’d have trouble saving too much money. Don’t let the magical final number get in your way of starting a 529 Plan.
Perhaps the perfect plan is to put away $300 a month to cover all of your kid’s college expenses. Maybe, perfect isn’t saving anything for your children. It doesn’t matter what the perfect plan could be. What matters is that opening a 529 plan is a good decision for your children’s financial future. Don’t let perfect get in your way.