My 5-Year-Old Has a Year of College Under His Belt

Filed in archive Education on April 25, 2007

We got a statement yesterday from our son's 529 plan that shows we have now saved enough money to pay for one full year of college at a state school. This assumes that if the dollars we have today are enough to pay for a year of schooling at today's prices, then the money we've put aside in the 529 will grow enough to at least match the amount that a year of college will cost when he's 18.

Given that my son has not yet entered kindergarten, I'm pretty psyched that we've already gotten to this point. My wife, though, the doomsayer, says that if it took us until he was five to get the first year funded, we still won't have enough to pay for a four-year degree when he enters college. She's so negative. We would have enough for three years plus, though, so we can continue saving during those first college years and have it all under control. I'm also hoping that as the amount grows, the compounding aspect of the investment will actually make it grow even faster than college costs, so maybe we will have all four years covered before he even starts.

If you're not aware, all states have 529 plans that allow you to put money away for your kids' college expenses in a mutual fund, and any gains on the money you've invested are tax-free, as long as the money is eventually used for college costs (tuition, room & board). A lot of states will also give you a tax benefit on the money you contribute to the plan as well. You can put money in whenever you want, so you're not forced to put a set amount in each month or anything like that.

We had a financial advisor help us determine how much we should put in per month to reach our goals, and so far it looks like he was pretty much on target. While I'm not a big fan of a lot of the advice he gave us, I'll give him full credit for getting this right.

You can find the 529 Plan for your state here.