If you can afford daycare, you can afford college
There’s crazy pressure on parents these days. From 1965 to 2012 the amount of time parents interacted with their children doubled according to a 2016 study by Guilia M. Dottia Sani and Judith Treas. What’s more is so many of the clients we work with have both parents working outside of the home. Often both are working full time. In 1965 typically only one parent (usually dad) worked outside the home. As a parent of a 16 year old and a 14 year old, it’s not hard to imagine that my wife (who like me, works full time away from the home) and I spend more time interacting with our kids than our parents did. (Full disclosure: our parents are awesome and do so much for us now, so I’m not trying to throw them under the bus. These are different times). There is just so much more pressure on parents now than ever before.
It’s scary to think that for families bringing a child into the world today, college will cost more than their house! For generations the most expensive thing Americans purchased was their house. Now it will be college for Gen Xers and Millennials sending their kids to school.
Initially it’s easy to kick the can down the road. I remember thinking “Just let me get to a point where this kid is sleeping through the night before I worry about college!”
Fortunately our college plan funding is on its way to a place where hopefully we can get our children through school without much debt. Here’s what I share with anyone who will listen on how Julie and I did it:
- Julie stopped working for that first year for each kid and so it is no understatement to say, money was tight!
- When each of our children were born, I opened a 529 for each of them. There were some gifts they each received from grandparents, relatives, friends, etc. All of that went right in. I also started saving $25 per month into the plan from our checking account.
- A few months later, I upped it to $35. Then a few months after that, I upped it to $50. You get the idea.
- But I’m a planner and I realized that even if I saved $100 per month, it wouldn’t be near enough to cover the cost of my beloved alma mater, Susquehanna University, even using a conservative inflation factor. Ugh!
- But then Julie decided staying at home wasn’t for her (or for us) and off to daycare we went. Our increase in income went almost completely to daycare! We were paying $700 per month per kid by the time Sam turned 1 and Julie went back to work! Our monthly 529 savings was still less than $100.
- Light at the end of the tunnel: kindergarten. Addy started kindergarten and we immediately saved over $500 per month in day care costs. I immediately started saving $500 per month in her 529. A few years later Sam made it to kindergarten and I did the same for him too.
Today, Addy is less than two years away from the start of college and I feel we’re right on track. Until early 2022, we had the benefit of a strong bull market that was as old as my son Sam. So it took a little pressure off. The market began its recovery at the end of last year and so we’ve seen a little bit of a comeback to help even out returns. Not only that, the investments we chose in our 529 we chose has automatically reduced risk every few years as the kids get closer to college-age.
After each kid went to kindergarten, we got their college savings on track. And we saved money each month because we weren’t saving quite as much as daycare cost. The trick is not allocating all of the day care money to something else once kindergarten comes. Honestly many families have to pay for the morning-care and after-care programs because their work days don’t quite line up with the school day, but thinking ahead isn’t too bad. Don’t think about the savings that will come from lightening up the daycare mode—just shift those resources in a different way into your child’s future.
