Where College Funding Fits into our Financial Plan

Dave Ramsey’s Baby Steps offer a simple approach to meeting financial goals by working on the first three steps one at a time. After retiring all non-mortgage debt and building an emergency fund, the plan teaches to work on steps four, five, and six simultaneously, with priority given to retirement investing, then college funding,  and finally mortgage payoff. We veered off the Ramsey plan with regards to prioritizing paying off our home over funding our children’s college savings plan.

When we finished Baby Step Three, our children were in preschool and kindergarten. The largest part of our debt snowball was a refinanced second mortgage, and we realized we had made a lot of headway on the principal  in a short amount of time. Using a mortgage calculator, we estimated we could pay off our house completely in 7 1/2 years with additional principal  payments that worked with our budget after fully funding our retirement investing. We opted to add minimally to our children’s college funds, knowing that if we stuck to our plan, our kids would be in 6th and 7th grade when our mortgage was completely retired, and we could invest more heavily in college savings accounts.

Today our children are 11, 10 & 5, and we have continued with our plan since it's establishment five years ago. Adding another child to the mix three years ago hasn’t changed our approach to college funding. When our home is paid off, we will begin investing substantially into each of our children’s college fund. Where we fall short, we will be able to earmark monthly payments for their education in the absence of a monthly mortgage payment.

In addition to creating a financial plan, we also talk regularly with our children about college choices and that we will expect them to work and help pay for their schooling. We’ve introduced them to the terms post-secondary option, scholarship, in-state tuition and community college. They emotionally grasp that debt takes away long term freedom, and learning about the about saving money through college choice already resonates with them.

Not everyone is able to financially support their children in their post-secondary schooling, and that’s okay. Parents can still guide and encourage their children to make thoughtful choices about where they choose to attend and the financial implication of those decisions. The first time someone suggested attending community college to me was when I was a senior, and I felt deeply offended. I was arrogant, and believed that option was below me. Perhaps if a plan had been a part of a regular discussion, I might have been open to different choices. One book that highlights an alternative choice to student loans in the absence of parental savings is Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parentsby Zac Bisenhoff.

I often remark, “I was a much better parent before I had children,” meaning I believed I knew what to expect. The same may be true of our college plan. It looks good and makes sense on paper, but what our children ultimately do will dictate the long term success of this theory. Moving forward with this plan is our most thoughtful way to approach caring for our children as they enter adulthood.