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April 25, 2006

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One of the best things my parents ever did for me was pay for my college. I came out with a degree and nothing else, which is a lot more than most folks. It took me a long time to appreciate this. It's one of the main reasons I've been able to come as far as I have. I understand the point about valuing the education, but if/when I have children I'll do my best to do for them what mine parents did for me.

An important thing to remeber about 529 plans is that their Federal tax exemption is set to expire in 2010, unless renewed. So if your children (like mine) are not currently in high school, you are better off first contributing to an ESA, which have exemptions that are not set to expire (you can invest in both).

I think it's a good idea to have the kids pay for part of the education, such as book money, fees, and for clothes, and other "household expenses". But no more than that. Their primary function in college is to get an education, and having the time to pursue internships, research/work in their field, or the time to really concentrate on their grades is extremely important. Consider: most people today go to college, so the competition for jobs is fiercer than what it was in years past when a degree was a bonus, not a requirement. It's not enough just to "get the paper" if you want the good job/graduate program that follows -- this is already the case, and will definitely be so by the time your children go to school. This means that it's important to have good grades -and- experience in the field if the student really wants to succeed. By the time your kids get to school, that combination may be a minimum requirement. So school should always come first.

The point of saving for a child's education is to ensure that they get one. This is difficult when you work and go to school, depending on your field and if your job will even accommodate your schooling. Most unskilled jobs don't pay a lot, which means students have to work longer hours than what they might have done when you were in school. This competes with time that can be spent studying. There are always campus jobs, but those may not cover the expenses needed if the child is meant to pay most of their own way. Also, don't underestimate the demands of classes -- it's not like high school, where a student could work and still get good grades. It's the difference between the housecat and the lion -- a college student may really not be able to _successfully_ balance the two.

In my opinion, if not working means the child can't attend college, then it's probably a better idea to have the child defer college until the money is saved so they can really focus on their studies. As a parent, you want to maximize the investment you put into the child, and it's important to know what your priority is: teaching the child responsibility at 18, or preparing them to achieve in school.

It would be helpful to evaluate the true demands of a college education and then plan accordingly. As far as the responsibility, it's hard to start that at 18. Start small...let the kids use their allowance money to buy school supplies, clothes for school when they are younger, etc. Work on time management, and budgeting with them early so they learn to minimize cost. But don’t ever forget that it’s their success in college that’s important, not just the fact they attended.

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