Educating Yourself on College Savings

By Tucker Marcheso

A 12-year-old boy named Richard Turere and his family raise livestock on the edge of a vast national forest park in Nairobi, Kenya. One of the biggest challenges is protecting the animals from lions-especially at night. Richard had noticed that placing lamps in the field didn’t deter the lion attacks, but when he walked the field with a torch, the lions stayed away. From a young age, he’d been interested in electronics, teaching himself by, for example, taking apart his parents radio. Richard used that experience to devise a system of lights that would turn on and off in sequence-using solar panels, a car battery, and a motorcycle indicator box. Thereby creating a sense of movement that he hoped would scare off the lions. He installed the lights, and the lions stopped attacking. Soon villages elsewhere in Kenya began installing Richards “Lion lights”.

Because of Richards’ contributions he has been able to travel the world, received college grants, and was even a speaker at a TEDtalk. People like Richard should definitely have the opportunity to go to college. Who knows what contributions they will bring to the world with higher education? But what happens when our kids don’t discover, create, or custom fabricate a life improving device at age 12? When I was a kid I too tore apart my parent’s radio, but wasn’t asked to speak at a TEDtalk. I did however turn my desire to know how things work mechanically into a degree in Bio-physiology.

For me, my education happened after the Marine Corps. I wanted to pay for my own way, even though my parents had college money saved for me. But I know that is not the normal. As I am looking at starting a family myself, my lovely Fiancé’, and I started thinking about our own planning and what it meant to us as potential parents. It wasn’t hard to find information about colleges and trade schools, or what degree programs, or grant, that is available. It also wasn’t hard to find out about the price. I won’t scare anyone with the results but I will share this. Since the mid eighties college prices have gone up 375%!

It is hard not to wonder what the next 20 years will bring in terms of cost of higher education. To even consider saving for it is daunting. What we did was talk seriously about what was important to us and how we would like to help our kids. We think it’s important to help but not cover the full expense. We think there are lessons to be learned by paving their own way. We do want to be able to help with supplies like a computer, phone, food, travel (so they can come home for a visit, or do laundry), reliable transportation, and an emergency reserve fund, for when that time comes too. They always come.

By our calculations, and my Fiancé’s amazing spreadsheet; we have roughly 20-25 years to save for these expenses. We started a personal budget and then got really honest about what was realistic for us to start saving today. Realistic isn’t always Ideal. But think of this, even if you don’t pay for an entire college or trade school expense (school, housing, food, etc) how many of the necessary expenses CAN you pay for, and how much will that help? So I took our worksheet to my office and got into research mode.
In my professional life as a Financial Advisor, I am aware of the IRS tax codes and products available to the industry that can help me save for college the most efficiently. I do a lot of planning for people when it comes to their family and estate. Making a budget and having an honest conversation with your oved one or partner is an exercise that I put my clients through, and one I would recommend to you the eader. The other big thing overlooked is inflation. Remember the 375% increase in college prices since
the 80’s? That wasn’t that long ago. What’s the next 20-30 years going to bring? If this isn’t looked at
when you plan it will be an unwelcome surprise when you’re ready to use the money.

There are a lot of plans that can be created. Most of the people who do the planning work are
Registered Representatives, CPA’s, and Attorneys. Things like Coverdell plans, 529 plans, and even
certain types of life insurance plans are available as tools to help save for college. There are a few
moving parts but once you understand how they work, it is pretty easy to see which ideas fit into your
plan.  For our planning we chose a combination of a cash value life insurance policy, (for flexibility and to avoid
tax consequences) and a 529 plan for some other tax benefits. They were easy enough to start, and fit
well within our budget. By putting our plan in place we now have a College savings budget. We
understand the importance of factoring in inflation (we used 6%), and had a great conversation about
our future! We even discussed saving for our own college costs; thinking that we may be interested
upon retiring, to go back to school.

I was so inspired by my own findings in this exercise of college savings that I contacted Mothers haven
about wanting to share my experience and what I learned during this exercise. In cooperation with
Mothers Haven and my firm Marcheso and Associates we are doing a series of classes for new parents
and their families over 6 months that will cover things like saving for College, keeping your financial
house in order, preparing for the unexpected, and others. I hope this article inspires some planning,
questions, and great conversation.

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