A Real Simple reader asks for expert financial advice.
Today the estimated cost of attending a four-year public college in state is a mind-boggling $18,326 a year, according to the College Board. Now imagine putting four kids through college―with at least two attending at the same time for four years. “It’s overwhelming,” sums up Diane Brown, 36, a health-education supervisor from Long Beach, California who also runs the fiction blog Buenabeach.com. But that’s exactly the situation she and her husband, Kasey, a probation officer, face. In less than two years, Diane’s oldest daughter, Kelsey, 16, now a junior in high school, plans to start college. The following year, Alaysia, 15, her husband’s daughter from a previous marriage, will join Kelsey. Then (gulp!) his daughter Chanel, 13, will be college-bound. And the bills won’t stop when Chanel graduates, as the couple’s youngest child, Kourtney, now six, will presumably go to college several years after Chanel graduates.
With no current college savings, Diane and Kasey don’t kid themselves that they will be able to foot all the bills. “Just like we both did, we expect that our children will take out student loans and help pay for a portion of their education,” says Diane. “We will also look for grants and scholarships.”
Her monthly pretax income: $7,250
Her monthly spending: $4,430
Diane’s Monthly Outlays
Mortgage, insurance, and taxes: $1,600 (her half)
Church tithe: $500
Medical (copayments, premiums, prescriptions): $275
Dining out: $250
Utilities: $200 (her half)
Personal grooming: $150
Credit card: $125
Activities and lessons for the girls: $115
Cell phone: $100 (her half)
Travel (saving for): $100
Entertainment (movies, theater, pool pass―not including dining out): $60
Gas: $60 (lately)
Cable, phone, Internet: $50 (her half)
Car insurance: $50
Car maintenance: $30
The Expert Advice
Diane and Kasey may not be able to pay for even a portion of their daughters’ college costs if they don’t make some smart moves right away, says Deborah Fox, a financial planner and the founder of Fox College Funding, a business that provides late-stage college planning in San Diego. She recommends a three-pronged approach.
- Tighten spending as soon as possible. Right now the Browns are living paycheck to paycheck and have no substantial savings. Fox looked at their current budget and suggested some quick cuts.
First she would combine their cable, Internet, and phone plans into one digital service, which could bring the cost from $300 to around $100 a month. Next, to reduce food bills, she would sign them up at thegrocerygame.com, which charges $10 every eight weeks to pull together all the coupon specials and in-store specials where they shop. “They should knock $200 a month from their food bill by using this site,” says Fox. “Plus, it will save time, since they won’t have to search for coupons from different sources.” To reduce the cost of museums, movies, and restaurants, she suggests buying an entertainment book (entertainmentbook.com), which contains coupons for restaurants, stores, and events in their area. She also suggests that they use gasbuddy.com to find the cheapest gas prices in their area. Finally, she suggests that they talk to their pastor about the amount they are currently tithing and explain their situation. “They should still donate,” she says, “but less. Instead, they can give more of their time, energy, and talent until they build a cushion.” If they do all these things, they could have more than $1,000 a month in additional savings. “And that is something to work with,” says Fox.
- Sock away money. The best way for them to save their money is to have it taken out of their checking account automatically, as soon as they are paid. However, before putting a dime toward college, Fox urges Diane and Kasey to start contributing to their retirement savings at work. “You can’t borrow for retirement,” she says. Also, schools don’t factor in retirement savings when they determine how much financial aid you qualify for. Next, she suggests opening a 529 college savings account, which will let their savings grow tax-free. With college right around the corner, however, they should steer clear of equities and invest their money in a stable-value fund or a money-market account.
- Position themselves for the best aid package. With more than one child in college at a time, they will probably receive financial aid. They can also increase the chances of merit-based aid by making their children as marketable as possible to colleges. “The daughters should take the most rigorous class schedules that they can handle,” says Fox. And they should work with a guidance counselor who can help them find schools where their kids will be above-average applicants. For instance, says Fox, “some schools are looking for female engineering students or kids who are strong in the performing arts.” If the Browns take all these measures, they can be assured of helping their children to get the best education possible.