A 529 Plan Is Not Enough To Pay For College, We Must Save More

In 2017 and 2019, I superfunded two 529 plans for my two children. Since then, my wife and my parents have also regularly contributed to the two college savings plans. You would think with all this aggressive saving, I would feel confident we'll have enough saved to pay for college. But I'm still unsure.

Given the pace of college tuition price increases, it seems like only three types of students and families will be able to pay for college without taking on massive student loans:

  1. The rich
  2. The poor
  3. Geniuses

The poor will get tuition adjustments, which is great. I'm always rooting for the poor to gain more education to break the poverty cycle. Geniuses will land enough free merit aid to make college affordable. Meanwhile, the rich will be able to pay for college through savings or cash flow without a problem.

The middle class or mass affluent class, which is most of us, however, are screwed unless our kids are geniuses or highly practical. We must pay for the full cost of tuition for four to five years. This expense will take a big chunk out of our retirement savings.

A 529 Plan Is Not Good Enough To Pay For Its Intent

Given my kids aren't geniuses, we've only got two options if we want to comfortably afford college. We either need to be poor or be rich.

I've decided to select the rich route by saving as much as possible and forgo any chance my kids will get financial aid. We don't get healthcare subsidies and we pay a boatload in taxes every year. So it would be foolish to assume any institution will ever give us any help with college tuition.

Yes, some middle-class families try to game the FAFSA application by reducing their income a couple of years before their kid attends college. However, unless there's a way of legally hiding assets from the FAFSA, we can't make ourselves look poor.

The main way we are saving for college is through 529 plans. However, after almost seven years of contributing to one, I don't think a 529 plan is enough to pay for college.

Given the all-in cost for attending a private university for four years will likely cost $1,000,000 by 2044, each kid needs to become a future 529 plan millionaire to pay for college from savings. Pretty absurd, right?!

Saving $750,000 For College For My Son By 2036 Is The Target

In 2036, twelve years from now, my son will likely attend college. It currently costs about $90,000 a year, or $360,000 for four years all-in, to attend a private university. Therefore, if I assume a 6% compound annual growth rate for 12 years, the all-in cost in 2036 will rise to $725,000. Over his four years of college, prices will rise even further.

To be conservative, I'm assuming a worst case scenario for college costs. This means no community college for two years first, no public university, no free grants, and no working while in school. My hope is that by assuming the worst, there will be upside.

I’m an old and tired dad. By 2036, I will be 59 with zero desire to work to pay for college. By then, I want to live a life of leisure with the time that I've got left. My other goal is to give him the gift of a fully-paid for college education instead of just money.

College tuition inflation is absurd

Praying For Public College

If he goes to a public university, then the four-year all-in cost in 2036 will be closer to $320,000 versus $155,000 today. As a result, he'll hopefully have a lot left over in his 529 plan. We will leave the remaining 529 balance for when his children go to college. A 529 plan is a great generational wealth transfer tool.

I'm a big fan of attending public university given that both my wife and I went to The College of William & Mary and did fine. We both could have paid for our tuition with minimum-wage summer jobs.

Our all-inclusive cost of $9,500 per year on average compared favorably to the $30,000 per year route for a private university. But I’m not sure I’ll be able to convince him of the merits of a public school education when the time comes.

529 College Savings Progress

With a target of $750,000 by 2036, below is how much we've saved in his 529 plan so far as of January 2024. This is after starting a 529 plan in mid-2017.

A 529 plan isn't enough to pay for college

$356,821 saved means $393,179 left to go to reach $750,000 by 2036. This means the 529 plan needs to achieve a 6.5% compound annual return for the next twelve years if no contributions are made. There are two problems with this goal.

  1. The 529 plan returned only 10.8% after the S&P 500 returned 24% in 2023. That is some serious underperformance because I chose a target date fund by Fidelity based on age. I can't believe how much foreign stock (27.3%) the 529 plan holds. Ugh. And of course, bonds have done terribly since 1Q2022.
  2. In California, once the 529 plan reaches a balance of $529,000, I can no longer contribute. In addition, I no longer have the ability to superfund the account.

I did my best to build up my son's 529 plan with contributions from three people. Yet, despite our best efforts, I assign only a 65% probability the plan will get to $750,000 by 2036.

In other words, after almost seven years of saving for college, I'm not confident we will save enough. In fact, I feel some despair since I also have my daughter's college tuition to save for. Her college cost will likely amount to $800,000 for four years starting in 2038!

For those of you with more than two children, please tell me your secret for saving enough for college.

Game Plan To Save More For College

For those of you thinking of having kids, please be aware of the financial stress involved in raising them. College tuition is no joke. If you don't plan accordingly, your relationship will your significant other will be negatively affected.

It is a difficult challenge to save for your own retirement while also saving for your child's college education. This is why many parents can't even think about retiring until after their kids graduate college. This also why many parents stop after having two children.

Here is my game plan to increase the chances we will be able to comfortably afford paying for two college tuition bills.

1) Invest new 529 money in an S&P 500 index fund

In a bid to potentially increase the likelihood of my son's plan reaching $750,000, I've opted to adjust the 529 plan contribution percentage to 100%, directing the entire gift tax limit amount I'll be contributing ($18,000 for 2024) into an S&P 500 index fund.

While contemplating whether to shift the entire 529 plan balance to the S&P 500 Index, I find myself hesitant about the associated risks. As a result, I like this hybrid approach.

Over the past decade, U.S. equities have consistently outperformed foreign equities, and I hold the belief that this trend will persist. Maybe I am suffering from home country bias, but I believe the U.S. will continue to lead the technology revolution due to artificial intelligence. Consequently, I am comfortable allocating approximately $100,000 of new 529 plan funds into the S&P 500.

Changing 529 plan allocation to more S&P 500 Index from target date fund

2) Increase 529 plan contributions sooner to hit the max

One strategy to increase earnings is to have more money invested. For instance, a 10% return on a $50,000 529 balance amounts to $5,000, while the same return on a $500,000 529 balance yields $50,000.

While the future performance of stocks and bonds remains uncertain, my plan is to swiftly reach the $529,000 limit for our son's 529 balance. Achieving this involves encouraging my wife and parents to contribute $18,000 each annually. With three contributors providing a total of $54,000 per year and assuming a 5% annual growth rate, our son's 529 balance should reach the contribution limit within two-and-a-half years.

Upon reaching the limit where additional contributions are no longer permitted, there should be a sense of psychological relief, as there will be no further actions possible from a 529 plan standpoint.

3) Get the kids to work to build up their Roth IRA plans

A Roth IRA stands out as the optimal retirement savings vehicle for kids and young adults. The objective for every eligible working kid is to earn an income falling between the maximum Roth IRA contribution limit and the standard deduction for the year, thereby paying no taxes.

Given that the standard deduction consistently exceeds the maximum Roth IRA contribution limit, contributing the maximum to a Roth IRA allows for tax-free contributions. The kid can then withdraw the money tax-free after five years if desired.

For 2024, with the standard deduction limit per person set at $14,600 and the Roth IRA contribution limit at $7,000, my plan is to engage my son in our online business, helping him earn some money for his Roth IRA. While he may not reach the full $7,000 at his age, any amount earned is a step in the right direction.

Fostering a strong work ethic and instilling the habit of saving and investing for their future is invaluable. Their Roth IRAs will serve as their skin in the game if their 529 plans fall short. It would be great if they could work for a decade and build up a $100,000 Roth IRA balance by the time they're 20.

4) Teach kids practical knowledge and skills before going to college

Lastly, the more time I spend teaching my kids practical knowledge and skills, the greater the chance they'll achieve a higher Return On Investment from college.

Consider the many college graduates who complete their education without acquiring practical skills. While they may possess extensive knowledge of American history, it's challenging to build a career spitting facts about dead presidents.

Hence, my objective is to educate my kids on subjects such as marketing, writing, speaking, business, sales, business development, branding, and Mandarin. By doing so, they may graduate college sooner, like my wife did by six months, or feel more confident that a more affordable degree is sufficient for them to live a good life.

Teaching children not only benefits them but also enhances the ROI of my own college education. This is one of the reasons why writing books and articles on Financial Samurai brings a sense of fulfillment.

In addition to business knowledge, I will teach my kids everything I know about being a rental property owner. This includes buying property, screening for tenants, writing a lease agreement, painting, remodeling, plumbing, electrical, negotiating, and landscaping.

Going into the trades is a great option if they so choose.

5) Pay off my rental properties by the time the kids are 18

One of the best real estate goals parents should have is owning one rental property per kid.

Ideally, you buy the rental property when your kid is born and pay off the mortgage by the time the kid goes to college. If you do, then cash flow from the rental property can help pay for college. In addition, once the kid graduates from college, s/he can either earn semi-passive income or live in the place.

think about all the property your parents should have bought when you were born. How much would they be worth today if they had? You can avoid your parents mistake by investing today.

Don't Just Rely On Your 529 Plan To Pay For College

Relying solely on a 529 plan to cover a child's college education would be a mistake. It's essential to calculate the anticipated cost of your child's college, assess the progress of your 529 plan, understand its investments, and estimate potential shortfalls based on different return assumptions.

Counting on substantial financial aid or assuming your child will attend a public or community college could also prove to be a mistake. In some regions, such as California, gaining admission to the UC system can be extremely competitive, even after years of paying property taxes.

Just as we acknowledge that no one will save us in retirement, we should adopt a similar mindset regarding college tuition – recognizing that no one will rescue us from the financial burden of higher education.

Embrace The Reality Of Being Average

Our children, like yours, are likely to be average, and average individuals often don't receive grants or make optimal financial decisions. Given this reality, it's prudent for us to proactively save a significant amount of money beforehand to prevent them from facing financial challenges post-college.

Throughout my time running Financial Samurai since 2009, I've encountered numerous highly educated readers who regret the substantial expenses they incurred for their education. Some feel a sense of guilt for not achieving more in their lives and are burdened by the fact that their parents had to sacrifice their retirement for their education. Some even find themselves still living at home, relying on The Bank of Mom & Dad well into their late 20s and 30s.

While I am currently frustrated by the exorbitant cost of college, I also feel trapped due to numerous unknown and uncontrollable variables in the future. Consequently, the only way to alleviate such concerns is to continue saving and investing. When the time comes to pay for college, I'd rather have enough saved versus too little. Alternatively, I could just revolt and bypass college altogether.

A big challenge will be to save enough for college while also not sacrificing too much of our lifestyle during the process. I’m facing a race against time. Unfortunately, time is currently winning.

Retiring Early With Kids Is Nearly Impossible

Roth IRA Or 529 Plan To Pay For College

The Best American Life Hack: Take Advantage Of Canadian Colleges

Reader Questions

Do you feel like saving in a 529 plan is enough to pay for your child's college education? How are you planning to afford college, especially if you have more than two children?

Is it really only the rich, the poor, or geniuses that can afford to attend without taking out major student loans? Who else feels trapped by growing college expenses?

Recommendations To Help Afford College

Plan for college better by signing up with Empower, the best free financial planning tool. With Empower, you can track your investments, see your asset allocation, x-ray your portfolios for excessive fees, and more. 

For 99.99% less than the cost of college, pick up a copy of Buy This, Not That, my instant Wall Street Journal bestseller. The book helps you make more optimal investment decisions so you can live a better, more fulfilling life. 

Listen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Please share, rate, and review!

For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

132 thoughts on “A 529 Plan Is Not Enough To Pay For College, We Must Save More”

  1. Isn’t a golden visa in Portugal 250k? That’s get you citizenship for the family which allows the kids to attend EU Universities essentially for free. As a smart investor, you’ll likely make a return on your 250k as well. With the numbers you are presenting, private college in the US doesn’t make sense anymore.

    1. Financial Samurai

      Not sure. But dang, $250,000 is still a lot for uprooting one’s entire family with no language skills in Portuguese.

      We’re going to learn Mandarin instead.

    2. You don’t need residency in Europe to take advantage of their universities for free. In France for example, studies are free, even for foreigners on study permits. The issue is, this is the case for public universities, but you’ll struggle to get a good paying job if you don’t go to school in the higher end private schools. So the french end up taking advantage of a program to access french speaking universities in Canada at a fraction of the price of other foreigners… Americans can study in Canadian universities paying full foreigner tuition, but it’s still chump change compared to the theft happening in USA universities.

  2. You make me feel a bit better. Thank you for your transparency, especially as successful as you are. It’s comforting to know even professionals don’t always have all the information, and make “educated” mistakes as well.
    Once I “took over” my 401k in a “self-directed” fund, the returns have almost quadrupled. As you succinctly pointed out, I thought those few options (offered in my 401k) were my only options, and they kind of were, until I discovered I could “manage” my own account by “offloading” it to our “partner” brokerage firm (for a fee, of course ). (So many quotation marks, sorry. ‍♀️)
    It’s frustrating when you don’t even know there is a question there to be asked. But better late than never, even if it is difficult not to imagine what my returns would like if I had started four years earlier!
    I should note as well, the returns aren’t a result of me “cracking” some code. They are what they are, based on the growth funds I chose, that’s it. When the market tanked on the tail end of Covid, they did too, sharply, so you have to have the stomach for that, and right now I do.
    The only observation I’ve taken from this experience is that target funds, based on age, and years until retirement, are basically conservative in general, no matter where you are on that journey.
    I would advise my nieces and nephews, just finishing school and starting careers, to be more aggressive in choosing, and not default to the status quo on offer. I hope they can benefit from my mistakes, leaving no money on table, lining their own pockets more, with the value-add of time plus patience.
    Thanks, Sam!


  3. I’m also investing for my children over a similar time span – my mother’s will only lets them have the money when they are 23 – but haven’t and wouldn’t put everything on the S&P500. The index has done very well but again is very expensive on a global basis and so I am diversifying globally (still a big weight to the US) and adding bonds, infrastructure etc. I am based in Australia so there is also a currency risk to just betting on the US.

  4. Since you want to live in Hawaii, Sam, I recommend you move here when your kids are in high school. This will improve their odds of acceptance, in particular for East Coast liberal arts schools seeking kids from every state. Our kid, who is a very good student, but no genius, was accepted at eight colleges, with sizable merit aid at places like Grinnell, Kenyon, Lewis and Clark, and UC Santa Cruz. He ended up going to another very good college, for which we’re paying full freight. He’s very happy with his profs and studies and fellow students. Given this, I think the ROI is worth it. My main point: move to Maui, pay less for private high school than in SF, and your kids will have a small but meaningful leg up in college application process… if you do indeed care about where they attend college (and it seems you do).

    1. Financial Samurai

      That’s the plan! But to Oahu where we have a house and family.

      Congrats on your son’s college acceptance!

  5. I have number 4 way to pay for college… be an amazing athlete and get open athletic full ride scholarship.

    1. Financial Samurai

      Sounds like a plan! 1% of HS students get college sports scholarships.

      Good to be part of the one percent in something.

      1. It’s less than that…most athletic scholarships are not “full” – i.e., most sports are not headcount sports. The 1% stat includes partial scholarships – which may be as little as $500.

        1. True, but less than 1% of the US also can save as much money as Sam is alluding to needing to save for college… So Athletic scholarship pursuit is probably better odds for low income families than trying to save a ridiculous amount of money on low incomes.

    2. Parents of many of the kids who do get athletic scholarships spent many thousands of hours and dollars and on their kids’ athletic development, e.g., travel teams, private coaches.

      I don’t suggest counting on a positive payback of such investment in terms of athletic scholarships. Where it can pay off is opening the door for acceptance to schools that would not accept the kids were it not for their athletic abilities.

      1. Great point about the amount of money spent getting your kid to be an excellent athlete before potentially getting the scholarship. So there is a cost of that for sure. But hopefully, the kid really enjoys the sport and can appreciate the lifelong school they develop. I still play tennis two times a week at age 46 based on the skills. I learned when I was a kid.

  6. Why are you stressing ? Why do you have to spend so much on college? Send your kids to California State University. The tuition is like $6800 a year. By time your kids are 18, it will only be $20k a year. Are you going to be one of those high expectations parents? My son is 15. I just plan on sending him to Penn State Harrisburg, which has a high acceptance rate. You’re just putting so much stress on yourself and your kids in the future for no reason. You don’t want to stress yourself out over money and get a heart attack or cancer…. My net worth is way less than yours. My husband’s retirement incomes is less than $100k a year. House is paid off. I’m not on social media staring at people’s vacations, homes, nothing. I don’t care… The reason why people are depressed, stressed and or broke is because they want to show off or say their kids went to Ivy League and are doctors. What if your kids don’t want to work like that ? What if they have mental illness like a lot of Gen Z?

    1. I actually feel sorry for you, but more so your son. Having a mother just expect their son to go to Penn State Harrisburg is such a waste. 86% acceptance rate and he’s going to graduate and work a minimum wage job or be unemployed.

      You should try to push your son to do more and be more. No wonder why each generation get softer and softer and then complain why I don’t have enough money to buy a house and survive.

      1. A waste? Most PSU grads I know who studied engineering enjoy a huge network of employers and make just as much as a lot of IVY leaguers who studied liberal arts.

        You sound very elitist Janice. Not everyone needs to have 3 vacation homes, a CEO job title, and a garage full of sports cars to be happy.

        1. Not PSU Harrisburg graduates. Many end up unemployed or underemployed. Instead of wasting 4 years at PSU, it would be better to go to trade school.

      2. Harvard grads make a median salary of $86,000. Those who have family connections end up with the 7 figure jobs like Jared Kushner. You do you. Feel sorry for my son and I. Then you’ll have to feel sorry for the 90% of Americans who are not doing well and live check to check. I feel sorry for Sam and his family to live under pressure just to strive for a bigger home or get his kids to become millionaires and they may end up with $60,000 jobs.

        1. If you read your comments, you are projecting your own securities a lot.

          Again, I feel sorry for you and your son. I want to provide the best possible opportunities for my kids. You are OK with providing below-average opportunities because you don’t have enough money to live elsewhere but Central PA and PSU Harrisburg.

          When your son asks why you and your husband couldn’t provide more as he’s stuck working a minimum wage job, you must explain to him way.

          Life is not a dress rehearsal. Your son only has one shot at college.

        2. Janice, I have earmarked $250k cash for my son’s college, but my son will get VA disability benefits to pay for most of his college. In addition to that should he choose to do post grad degree then state of Virginia or Alabama will pay 100% of his tuition until age 31. I wasted 6 years in undergrad and then 4 years in pharmacy school because I didn’t know what to do. I knew a lot of my classmates and colleagues got out of school with $200k loans. That’s not going to happen to my son. I have so many different options than you and I will probably spend minimal on my son’s college. Columbia University and William and Mary have sent him mail. I’m NOT paying for him to go to those schools..My son is Afro Hispanic and probably has a lot better chances than an Asian who oversaturates the job market. If my son is medical school caliber then he can go to a med school in VA, Alabama. If he gets a half tuition grant or scholarship after Penn to Stanford or MIT then I will pay for that. I do not plan on spending the full $250k for my son when he has so so many options as the son of a veteran. I could give him this money as a deposit for a house. I’m ecstatic to be the wife of a veteran. You don’t know how wonderful it is not to not be a slave to a boss or have to worry about bills or taxes.

          1. “ My son is Afro Hispanic and probably has a lot better chances than an Asian who oversaturates the job market.”

            So you’re racist as well? This explains a lot about your low expectations for life and for your son and why you are lashing out in this post at people who want to do better.

            If you wanna break the cycle of low expectations, try to have higher expectations for your children. Using race to try to get ahead, will only take you so far. At the end of the day, meritocracy wins.

            1. I’m Asian but there is no way in hell I’m going to have him put that on his college applications because despite getting rid of DEI, most companies would rather choose the more diverse candidate. If your kid is Asian or white, then good luck! Lol. I feel sorry for your kids. It sounds like you’re ramming your kids hard to excel into getting into some Ivy school. You’re putting so many expectations on them. Do not do that. I do not do that with my son.

              Don’t you worry or feel sorry for my son. We are wealthy and debt free. I do not live off my stocks either. My son could be offered free grants and scholarships, I don’t know. The world is literally his oyster.

              1. Angela, I’m sorry for your frustration and pain.

                I would be better if I was laid off from CVS for a 20 something year old as well. It must also be tough living in central Pennsylvania and having a husband with a disability.

                I would recommend that instead of venting on to strangers, define a support group of other mothers. Even one or two friendly mothers will make a difference in your mental health.

                Life is not always going to be easy as you know, but having friends to commiserate with, and laugh with helps alot.

                1. Lol. I get the same responses on MSN when I talk about how I have not suffered in Bidenomics. No one believes me.

                  The thing about the VA disability is that a lot of people get it. My friend and neighbor has a husband who gets disability, military retiree pension and works so she also doesn’t work. So every day we talk about how people can’t manage to save but she and I have. She and her family doing well. She hasn’t worked since she was 38 and is now 51.

                  I also had a lot of neighbors in Virginia who got the VA disability money, retiree pension and WORK for the Fed govt as contractors so there are a lot of veterans who are doing quite well.

                2. Janice, lol, I’m happier than 98% of Americans. I am in the top 2%. I live in central PA in a huge house (paid in full and no prop taxes) just so I can have MORE liquid assets. I’m not going to argue with you anymore because I’ve gotten the same responses on Yahoo and MSN. People find it hard to believe there are millionaires on disability. Lol.. If only you knew. There are plenty of them in the DC metropolitan area. Veterans on here, I’m sure y’all know what I’m talking about.

                  Have a great life working until, you’re 65!

                3. Janice, my friend next door with the disabled vet husband who has 3 sources of income (and works)? They owned 4 properties. She sold one of them in DC and now owns 3 properties. You have no idea how many millionaire veterans there are out there. There are plenty of us.

                  Yes, she and I do laugh a lot. We laugh at all the Republicans who complain about Biden. We are hard core liberal elites, both from the DC area. How do you think I discovered Financial Samurai? I Google median net worth, median savings, and how many people live check to check. Sometimes my neighbor gets irritated because I can end up sounding like a braggart or smug, but I’m pretty much top of the food chain compared to most Americans.

                  My neighbors are Hershey executive, VPs, lawyers, and doctors. In fact my husband’s doctor lives a block away. There’s nothing to commiserate over.

                4. Janice, your kids will become mentally ill because of you. What will you do when they don’t get into a good school or make anything close to $100k? Abandon them for being losers ?

                  Where did you go? You can’t stand the truth? I suspect that you are suffering financially or mentally for you to have your mindset. You are obsessed with a name brand school,but there is a backlash to anything remotely Ivy because of their extreme antisemitism.

            2. Janice, I feel sorry for your kids. It sounds like you’re Asian and they will end up being just average or laid off just like my son or Sam’s kids could. Living in America is very unstable now, unless you’re heavily connected and related to someone in the top 1% then most Americans will die in debt and live check to check. I got out of the rat race as did Sam. Sam has a lifestyle but could do much better. Our kids will probably have to work until they’re 70. I doubt your kids will be in the top 2%.

            3. Janice seems like a miserable human being that’s jealous of anyone succeeding in life without being gifted an small inheritance from their parents toward an IVY league education. I find people who succeed despite their modest backgrounds to be much better employees and harder workers in life. As an employer I seek out people that didn’t grow up with silver spoon in their mouth like Janice’s kids.

              1. Thank you, Silver Spoon! I didn’t go to anything close to Ivy League schools and my veteran husband is a high school drop out (Army made him get GED) and here we are in top 2 % of net worth in America! Zero DEBT here. No mortgage, no car loans, no credit card debt. One can be a millionaire simply by being a teacher who makes $60-70k and investing in 401k and living below their means per Dave Ramsey.

                My neighbor is also a former DC resident. Her husband is also a disabled vet. He has his military retiree pension as well as work. They owns 3 houses. She’s in the top 5% club and she says her kids can do two years in community college! She’s not paying for an overpriced school because they may drop out. I have known 4 family members who have dropped out of college.

                Janice counters my comments saying PSU is an inferior school or I must be frustrated I live in Central Pennsylvania with a disabled husband. Lol. There are so many vets who get disability yet they also work & buy second homes, go on European vacations, etc.

                I seriously doubt Janice has as much wealth as I do and I also doubt her kids will even score well enough or actually get into any Ivy League school. She may be broke with a MORTGAGE and struggling & it feels better for her to disparage me and veterans.
                Where are you, Janice? Figuring out your budget for the week? Get this, I DO NOT BUDGET like you or Sam. Bidenomics has not hurt me. I’ve never budgeted since 1999. Lol.

      3. And Janice, ha, I got a Harvard grad who lives one house away from me. It’s hilarious because when my husband first talked to him, he was so busy showing off he had graduated from Harvard and asked my husband where he went to school. My husband said he was a 10th grade drop out and got his GED! As Sam says, sometimes life is about luck. Even if you go to a better school than 99% of population, you could end up on the same block as a high school drop out!

          1. Sam, I just hope you don’t put too much pressure on your kids. I’m not. For your kids to excel they can also become teachers and save slow via 401k as Dave Ramsay always says otherwise they’ll have to become engineers, physicians, neuroscientists. Pretty soon AI or robots will be financial advisors.

            I’m 52. I got into GW university and University of Southern California in 1990. Unlike Janet’s advice I went to GMU. I didn’t want my parents to pay too much. I went to a school that Janice would consider subpar. I’m not going to sweat it if my son ends up min wage or underemployed. It is what it is. What if your son doesn’t want to be a nuclear physicist or tech CEO? What if he wants to be an actor or nothing? Each kid is different. There are no engineers or physicians in my family. They are all average people who got business degrees and do office work.

              1. Sam, did you read about the Indian family, the Kamals in Dover, Massachusetts? I don’t work and I Google and read true crime daily online as well as watch “Dateline” and documentaries and read true crime books.

                Anyhow, there is an Indian family named the Kamals. They were living a lie. The husband pretended that he had graduated from MIT and the wife lied that she graduated from Harvard. They sent their daughter to a tony private school and some college I never heard of in Massachusetts. They also bought a 27 room mansion. The house was foreclosed & they were supposed to move out this month and the husband shot the wife and daughter before killing himself. They were living an extravagant life like the Murdaughs or Chris and Shannan Watts,but could not afford it.

                There was another murder in the Philly area. A mother, Ruth Dirienzo Whitehead, was a realtor and sent her preteen son to Germantown Academy. Well, she must have been losing money from not working much and she strangled her son to death because she didn’t want him to suffer financially! She said her son was distraught that he could not go to the private school because she told him she could no longer afford it. This boy was spoiled his entire life with many vacations, MLB games, vacation house, etc. She owned a beach house in Cape May, NJ! There were so many options these people had besides murder! The way people are frantic about their kids having the best lives are ridiculous.

                Parents need to chill out. C’mon. I was a public school kid. My middle school wanted me to go to Thomas Jefferson High in Fairfax County, which is one of the top 5 public schools in America. I had the common sense to know that just because I am Asian, I’m not that brilliant and I did not want to suffer with a rigorous course load. I refused to go there and went to my sub par public high school. I turned out ok. I could return to work now but after not working 7 years, I’m spoiled and too lazy to deal with irate humans or bosses.

  7. A 529 is plenty when I realized, too late, that most US universities are cesspits of antisemitism and for my children’s own safety they should live at home, go to community college, and then transfer to the nearest 4 year university to finish off their degree. Actually, we saved way too much given I don’t want my children living in a dorm where the university might or might not protect my children, as it “depends on the context.” Fortunately, we can now convert 529s to IRAs.

  8. Dear Sam,

    Your insights on 529 plans in the context of AI’s impact on education highlight an important point. While these plans have their merits, I’ve already been advised to explore other options that offer immediate tax benefits, given my 50% marginal tax rate. This advice aligns with my perspective on the shifting educational landscape.

    As AI reshapes career and educational pathways, I am increasingly convinced that traditional college saving strategies may not align with future realities. It’s an interesting time to rethink how we prepare financially for our children’s future.

    Thanks for shedding light on this evolving issue.

    Best, JG

  9. Sam, I think you’re worrying yourself too much! My friend and I were debating the other day about her state’s prepaid tuition option (MI MET) where parents are allowed to pay for future higher education at today’s rates.

    Back in 2018, she paid $65,000 upfront for 4 years of public-school tuition when tuition at our alma mater, Michigan State University, was $54,360 or $13,590/year or for 4 years. Based on the CPI Index, $65,000 in 2018 is worth $80,440 or $20,110/year.

    HOWEVER, the actual 2023 tuition at MSU this year is only $15,648/year or $62,592 in total. She would’ve been better off putting that $65k into a 529 account invested in the S&P 500!!
    We performed this calculation on Northwestern University (a private school) and noticed their tuition increase from 2018-2023 wasn’t on par with CPI increase neither despite costing 4x as much as the flagship state school.

    Therefore, I feel that the general 7% increase based on your analysis above cannot be used as a catch all for all universities tuition increases and you should take it easy considering you’ve already super funded both kids accounts and there is a possibility they may not even spend it all!

  10. We home educate 5 kids.

    Our oldest is graduating the University of Washington in April with likely about a 3.98 GPA.

    He earned his HS Diploma and Associates degree at a local junior college before transferring to the university.

    TOTAL cost of a 4 year degree? (Living expenses covered by a part time job).
    $45,000 (including a month in Costa Rica at an immersive language school).

    His two younger brothers are finishing up 6-month commercial dive welding school next month.
    TOTAL cost for both of them? (Including room and board)

    They are all in their early 20s and will have zero debt, because we saved diligently for the higher education since they were born.

    Sure, the cost of education may continue to skyrocket over the next 15-20 years, but the Law of Diminishing Returns is increasingly self-evident for many (which may result in decreased demand).

    There are alternative ways…

  11. Buddhist Slacker

    Regarding teaching your children practical skills, please teach them Excel. We get so many interns from Cal and all the local schools who don’t know any Excel. It’s a serious time suck for me to teach them. At least at this time, kids with intermediate Excel skills are going to stand out as interns no matter what field they are studying. You’d think they could at least watch Excel dictionary on Instagram or something. You don’t even have to be that smart to master enterprise software, whatever it is, in whatever form it happens to exist in, when your kids are college age. As long as huge corporations and governments exist, there’s always going to be demand for people to keep that corporate machine going and those people can make a decent living.

  12. I’m an entrepreneur, so I have different opinions about college. It may not be the best route for my two boys (degrees have certainly had diminishing returns, and free speech is on a rapid decline). If it’s to be a doctor, lawyer, or something that requires it that’s one thing. Otherwise, it’s an extremely questionable investment.

    I’m paying my kids through my business to get tax free money to them, and then getting an overfunded WL policy on them up to the MEC limit. Pay in for 7 years, and they’ll have hundreds of thousands (millions if they don’t touch it) of tax free money to use for funding college, buying a house, investing in a business, or anything else.

  13. Cost for college is no joke. I have a friend who sold one of her houses to pay for her two kid in public schools in California. Some of my friends pay for college by income from rental houses. Some bought rental houses specifically for college when kids were born and transferred the house to kids once they’re grown to live for 2 years ( to avoid capital gain tax) and then the kid sold it to pay for student loans.

  14. We have 4 kids (2 in college now) in VA which has great college options here. We’ve told our kids we’ll pay for 4 years in state PUBLIC college. If you go outside that boundary (private, or OOS, or other), you’ll have to pay the difference. When your kids are in middle or at the latest early HS, tell them your financial limit. Husband and I both work and have made this (and retirement) a priority – not trading up for a bigger/better house, fancier car, etc.

    1. Oh my, I’ve been afraid someone would say this. My kids are 12, 6, and 5, and I was targeting 200 grand for each of them. Maybe I need to go up? I do have it all invested in common stocks, so they had like a 25 plus percent return last year.

    2. Financial Samurai

      Hope they go to William & Mary, my alma mater. Great deal for in-state tuition. Feels like a cozy private university at times given it’s not that big and its campus is beautiful.

      I LOVED my time there!

  15. The cost of college is what parents make it, often thinking with their hearts and not their heads. Bragging rights, etc. Two years at a JC is free in Cali. That’s 50% of college paid for right out of the gate. Then, live at home and attend the closet state school. The cost is so minimal it’s pretty much inconsequential. From there, they are considered independent and use their own low income to get money for grad school. On top of that, if the kid takes enough AP classes in HS they can get their degree in three, effectively paying for only one year of college to earn the undergrad.

      1. Yep. Son just transferred out of a CC and on pace to get his undergrad in three like his sis before him. Kids certainly have the right to disagree and self-fund the “college experience” of their dreams. Just like a kid could kid protest a serviceable vehicle given to them at 16 if it’s not a Tesla. Pretty sure they are old enough to where their wants won’t hurt them by their late teens. Neither will have a penny of school debt and daughter will be wrapping up grad school which cost her almost nothing as an independent and will be interviewing for six figure jobs in a matter of weeks.

  16. It’s great that grandparents are chipping in the max. My kids’ grand parents chip in $1000 per kid (x2) a year. That’s better than the other grandparents who have contributed $1000 per kid exactly once in 10 years. I guess it makes them feel good to know they “helped” but everyone is living in a dream world with these paltry contributions when the price of tuition, room and board is 35k per year at a public school today. To your point, that price will double in 9 years! I don’t look the gift horse in the mouth, and obviously appreciate any help, but I do sneeze at the size of the gift given the size of the challenge to fund their future education.

    Sam, I think you should write an “OK Boomer” styled post about how old people can’t fathom how much more expensive stuff is today for younger generations.

    I’ve tried to nudge them (the boomers) to accept that the transfer of wealth to my generation in 15-20 years is too late—by then I’ve had to do all the planning and prep as if it wasn’t going to happen. Even in a best case scenario, what good is an extra million going to do me when I’m 65 or 70?

    I need it now so it can grow so my kids can use it in 8-10 years.

    1. Financial Samurai

      It is a good debate about passing on one’s wealth after death or while still alive.

      It makes more sense to pass on wealth while alive when the money is more needed. Besides, it feels better to help your adult children when you’re still alive so you see where the money is going.

      The cost of college is indeed ridiculous. Something has to change.

  17. “Yes, some middle-class families try to game the FAFSA application by reducing their income a couple of years before their kid attends college. However, unless there’s a way of legally hiding assets from the FAFSA, we can’t make ourselves look poor.”

    There is a way of legally “hiding” assets. You get the max PELL grant if your AGI is below a certain cutoff. No asset check done. It might be hard limit to fall under for people with a lot of taxable investments though. But shifting income for an early retiree is quite possible. For ’24/’25 the AGI cutoff for a two parent household of four is $48,563.


    “To be conservative, I’m assuming a worst case scenario for college costs. This means no community college for two years first, no public university, no free grants, and no working while in school. My hope is that by assuming the worst, there will be upside.”

    I don’t understand this way of thinking. You wouldn’t save for a high priced luxury car for your kids because they might want one when they come of age, right? I don’t see how spending on Ivy league colleges is much different. The rich do it I believe for status/social standing. And it feeds into the rampant nepotism in both college and later for employment. I guess that is called “networking” and maybe that is it? That is what you get for the additional cost? Perhaps I just don’t understand Ivy colleges. You even say how college likely isn’t worth it anymore.

    IMO, most of the middle class doesn’t even consider ivy colleges (public or private) because of the additional cost when compared to an in-state public college. For instance, one of the higher cost public schools in my state shows total cost of attendance is $34,544 per year (23/24) including on/off campus housing and food. This is $138,176 for 4 years.


    1. Thanks for the color. So no assets are needed to be reported at all? Fascinating.

      Who said anything about Ivy League college? I already said my kids aren’t geniuses, so it’s unlikely they’ll get in.

      I’m thinking of the second tier private universities like USC, BU, NYU. Even those are now almost impossible to get into.

      Worst case scenario doesn’t mean getting into an Ivy.

      How about you? How are you saving for college and where do you plan for your kids to go? I’d love to get more readers the points on what they are doing. Don’t be shy!

      1. I have 3 kids and am saving for 4 years of the public school I mentioned. But I haven’t decided if I save 100%, 50%, or somewhere in between. 75% would encourage them to seek scholarships or work part time jobs to have some skin the game. And I want to give them options but if they want to go somewhere more expensive then they need to make it work out financially. Probably need a combination of working and loans. And many second tier or ivy leagues likely won’t be feasible.

  18. I find it sad that a guy as smart as you is worried about sending your kids to college for $1 million?? …seriously just start putting all that money in an index funding or better yet an REIT in the southeast and they’ll never have to work.
    But the really the bigger question is why aren’t you solving the problem? You’re super smart guy? Instead of asking how are you saving for your kids college? Why not ask? Why aren’t there better alternatives than college?
    For instance, if your kid wants to be an electrician they can go to trade school.. no problem… or an engineer they can go to college. But so much of college is BS degrees. There’s gotta be a third solution that’s not there yet.
    It’s like why can’t there be a third option other than trade schools or college. It’s a way under served market. It’s a huge opportunity. You talk about being 57 and tired when you kids goes to college. If you’re tired at 57 you will be grade A bore. I’m 57 I’ve got five kids under 16. I know this problem but there’s not enough people trying to solve it the fact that you’re just going to continue to feed the machine your just perpetuating the problem.
    Lastly, there’s not enough focus on all the other problems like and not limited too, alcohol abuse, drug abuse, fast food abuse, Overweight nation, numbness, and dumbing of our society….

    1. Thanks Jim. Remember, you’re rich, as you have mentioned multiple times about your $20+ million net worth. So you’ll be alright. For most of us, we have to save and invest diligently for college.

      Hope you’re able to spend quality time with your kids. Not sure after $20 million, spending time more time making more money is worth it.

      Maybe you will be able to share back the $5,000 year end from our S&P 500 bet. Or maybe I will pay again! Exciting.

      1. Jim JOHNSON

        You didn’t take the bet,
        But had you taken it you would’ve won!!
        Regardless, it doesn’t matter regarding this blog. Why don’t you spend the rest of your life focusing on what could be better for kids other than college?
        I’m not rich.
        How about you figure out how to make things better for kids going forward?
        Not just college not just straight school. How about a third option? How about you come up with a third option how about you be the leader of the third option
        YOU COULD OWN IT…it needs a leader. Think bigger and better than just money.!

        1. I did take the bet. I responded and there is a time stamp in the comment reply. But if you want to back out, I can’t stop you. Just know that I paid my bet when I lost and will always honor my bets. I couldn’t live with myself not being a man of my word.

          If you don’t think you’re rich with a $20 million net worth, I can’t help you. I think it’s probably important to talk to someone as there could be bigger psychological issues at hand.

          Less focus on business and more time with the kids is probably a good idea, especially with five kids at your age. I think you’ll miss them when they are out of the house more than you will miss making more money.

        2. Jim – Wow, you’re rude and you’re reneging on your bet? Sam confirmed in the comments section and I saw it too.

          Don’t be like that. And if you have a drinking problem, seek help. You’ll end up just ruining your marriage and your relationship with your kids.

          1. I had never checked back on that Bet. I thought we were talking about 2023 my mistake. Yes I do have a bet with Sam, 5k for charity . I will not renege. And you’re right alcohol is no good.

  19. Started 529’s when my kids were young with a vague intention of saving a bunch, then eventually settled on this as a do-able goal. First goal is to have 4 years of in-state room + board + tuition saved by approximately freshman year of high school. Then 4 years at an out of state school by approximately freshman year of college. Then if incomes and cost allow, private might be an option, by continuing to pay while they are in college. When they are a senior in high school, we can discuss, and they might need modest loans to do private school, but they will have choices (public school) that are free to them.

  20. Sam, your numbers seem very high for most people. Today the average 4 year degree from a public university is $104,108 and between 2001-2021 (two decades) college inflation average 5% annually.

    Using both of these, a child born today would need $250,548 to graduate with a bachelors degree from a public university. That’s about $750,000 less than your target number.

    Perhaps a better question to think on is what’s the opportunity cost of a private college versus public university.

    A hypothetical:

    Child A: parents save diligently and pay $1,000,000 for a private college education.

    Child B: parents save $250,000 for a public college education and invest the $750,000 into a vanilla S&P500 index fund the day the child is born for a graduation gift the day the child graduates college.

    The results?

    While kids get college degrees, Child B also has $6,105,206 in walking around money in his pocket on graduation day. If the child, now graduate, decides not to touch it it’ll be over 30 million at age 40.

    Call me crazy, but if given the choice I’ll choose to be child B every time.

    1. “Using both of these, a child born today would need $250,548 to graduate with a bachelors degree from a public university. That’s about $750,000 less than your target number.”

      More like ~$500,000 less than my $750,000 target.

      “Child B: parents save $250,000 for a public college education and invest the $750,000 into a vanilla S&P500 index fund the day the child is born for a graduation gift the day the child graduates college.

      The results?

      While kids get college degrees, Child B also has $6,105,206 in walking around money in his pocket on graduation day.”

      Is this what you’ve done? I’m just trying to save and invest up to $750,000 by the year 2036 in the first place. I don’t have the $750,000 to start.

      How much have you saved for college and what are your kids planning on doing?

      1. Hi Sam,

        We were blessed to have our second this year. We put 50k into her 529 account which based on projections above should cover college. We remain flexible and know planning 18 years in the future is just a best guess, we may contribute and we’re flexible with that.

        Our plan now is to save and fund an Ira for the kids when there is additional funds we wish to pass down to them now rather then then risk over saving in a 529.

        1. Financial Samurai

          Hi Josh, congrats on #2.

          What type of projections/assumptions do you have where $50K will grow to enough in 18 years?

          My entire point of this post was that superfunding )$180,000 contribution this year,) is probably not enough.

          1. I read your post but have a different opinion on assumptions.

            My concerns are on:
            1. The 10% penalty for over saving in a 529.
            2. Opportunity cost of a private college.

            We are saving for a 4 year public college degree. Our daughter was born in the last 4 months so we’re ball parking on 250k for public university. I posted the math above.

            50k into a s&p500 gets us there in 18 years with average historical returns.

            Lots of factors can change between now and then. Examples:

            1. College could cost less. Current president is pursuing student loans forgiveness. What if a future president addresses tuition costs altogether and end up looking more like Canada or Europe?

            2. Market can fluctuate and we may miss the mark.

            Regardless we feel like putting any additional savings beyond a public 4 year degree into an IRA and then brokerage account gives us more flexibility for the unknowns.

              1. One last comment from me. In addition to risks of over saving in a 529 (10% penalty) is the opportunity cost of the private university.

                “ Earnings are 14% better than at public research universities – a difference of $7,729 per year.”

                You projected a private college will cost $1 million and I’m projecting a public university will cost $250k a difference of $750k. Just using the well known 4% rule you can get $30,000 in annual income from investing the savings from the public university, a 388% difference.

                Not even factoring what you get if you invest the 750k in s&p500 and let it sit for 20, 30 or even 40 years.

  21. Sam – thank you for another strong piece today (below).

    A couple of ideas:

    1: I cannot help but believe that “college” will look much different in 10 years – and hopefully – becomes more affordable (I am less sure about this aspect).

    2: As one who has paid full freight for two undergrad educations and an MBA for our kids, you do not need to have the full amount on the first day of your oldest child’s college experience – you still have 3 additional years to save/invest/compound.

    3: Your urgency around this topic is impressive – I love the intensity – wish others felt the same way. To many parents, paying for their child’s education is an after thought.

    Thank you for all that you do.


  22. Technically the 529 is for tuition really and it’s running at a private college $60k-70k/year or $240-250k for tuition. So how can you what you have not cover the tuition?

    Answer for us is the 529 is for the tuition our kids are 11 and 14, we hvae 4 and 6 more years before college. And I figure we will have enough to cover tuition and then cash flow living expenses.

    1. Sorry if it was not clear. Oldest child attending college in 2036. I will bold “2036” in the post.

      From the post.

      “Saving $750,000 For College For My Son By 2036 Is The Target

      In 2036, twelve years from now, my son will likely attend college. It currently costs about $90,000 a year, or $360,000 for four years all-in, to attend a private university. Therefore, if I assume a 6% compound annual growth rate for 12 years, the all-in cost in 2036 will rise to $725,000. Over his four years of college, prices will rise even further.

      To be conservative, I’m assuming a worst case scenario for college costs. This means no community college for two years first, no public university, no free grants, and no working while in school. My hope is that by assuming the worst, there will be upside.

      I’m an old and tired dad. By 2036, I will be 59 with zero desire to work to pay for college. By then, I want to live a life of leisure with the time that I’ve got left. My other goal is to give him the gift of a fully-paid for college education instead of just money.”

      1. I put our college savings in ESA and 529 and UGMA all in voo when the kids are born. Still there at 11 and 14. Figure might as well ride it out. We have time minimum 5 more years. Plus we’ll make up the difference with whatever is not saved. I looked specifically for a 529 and did it with vanguard and I think NV and dumped it into VOO.

    2. 529 Plans can actually be used for tuition, room/board, health center fees, other student fees, and necessary class materials such as books and computers. For many private colleges, that current all-in cost ban be in the $75K – $85K range. I’m not aware of any in the $90K range, but I would not be surprised if they exist.

        1. I believe they may exist. Just for kicks, I looked up NYU. On their own site, they have all-in costs estimated at $85.5K. My high school senior is not attending there, but he is attending a school of comparable cost. I estimate we’ll have 3.5 years covered through his 529, with part of senior year coming from our invested funds.

          1. Lots of folks here tell me to just have my son go to CC or public school.

            Curious if you talked to your kids about the cheaper route and what they said? Why not go to the local public university and save a lot of money?


            1. We did talk through all of the options. For this child, he’s a savant film maker, with a talent that emerged when he was four years old. An elite film school was his most likely college path. I don’t think that would be everybody’s choice, and I respect others who would have gone another route, but we knew we could afford it. The cost is shocking though.

              1. Cool! Hope to watch one of his films one day.

                Is there a net worth you think one can reach to them NOT feel bad spending so much money on college?

                For example, if you have a net worth equal to at least 10X of total 4-year cost, then you will feel fine? In this case, the number would be $7.5 million net worth after paying $750,000 for college. But maybe not. I think the multiple might have to be at least 25 times to not feel bad spending so much.

                1. Hard to know specifically, as I think that would vary so much from one individual to another. For us, it’s around $7M (including everything). These young students and their ultimate interests can vary so much as well. I think there are so many paths a family can take, and I think success can be achieved on any one of them.

                2. Sounds good. I’m glad you have found peace with paying for the exorbitant price of college.

                  If you’re feeling good at $7 million, then maybe the right number is $14+ million for me given tuition will double in 12 years when my son goes.

                  This goes back to my original thesis of the post, though. Only the rich, the poor, or geniuses can afford to go to college.

                  What the heck are the middle class going to do? Something has got to give.

  23. Hi,
    Thank you for your article. When my first daughter was born I received a letter with information about 529 plans, including target savings of $450,000. I burned that letter back then because I thought this number was ridiculous. That was 10 years ago. It looks like the estimate was on the optimistic side and today we have three children, which requires us to be millionaires just to get them through college. It doesn’t make sense. Our plan is to send the kids abroad where they can get a very good college education at a much lower cost. Of course, this is the parents’ plan. Let’s see what plan our children will come up with when it is time to apply.

  24. Canadian Reader

    What happens if you kick your kids out and they have no financial help from you? Does the university then consider them low income for the purposes of acceptance and loans?

    1. They could file a request to “quit” ( not sure what word they use) you as a parents. Then they can file separate tax return and qualify for financial aid. But that would be cheating if you’re still acting as their parents.

  25. How to cover the cost of college for your kids without falling into any of the three categories or doing anything in the enumerated game plan: move to Texas and join the military; the cost becomes irrelevant.

    Here’s why: the Hazlewood Act, a Texas law, and the Post-9/11 G.I. Bill both allow full transfer of educational benefits to your children. The benefits are tied to the cost of tuition, not a set dollar amount. In the case of the G.I. Bill, it is also tied to the cost of living in that area. You can use both benefits, and for multiple children, though there is some nuance to it. It also would require attendance at a public institution to fully implement that strategy.

    This option is somewhat tongue-in-cheek because most people won’t do this, but the point is that many paths exist where the cost of college is a far smaller issue, or even nonexistent.

  26. The cost of college is pretty disturbing, so I can understand your tribulations about affording it all by the time your kids are applying. Sounds like you have a solid jump on your kids accounts though. Most people haven’t even saved 10% of that. You also bring up a good point about how the middle class tends to get screwed the most not only in how much they have to pay but also with getting their kids accepted to good schools in the first place. Glad you figured out how to allocate all new contributions into the S&P. Similarly, I remember when I first had a 401k I used target date funds because I thought that was the best and really only choice, but later learned that I was much better off selecting my own individual investment holdings. Best of luck with the saving. Your kids are lucky to have you!

  27. California Expat

    Another option is to move to Florida – we have amazing prepaid college tuition plans. For example, we started the prepaid plan for our 3 year old when he was born and pay $175 per month until he’s 18 and he’ll be able to attend any Florida university without paying any additional tuition. We’ve essentially locked in his tuition costs at around $38,000 for a four year university and we pay it in monthly installments over 18 years. On top of that, the state offers a scholarship for all Florida students that achieve a certain test score and maintain a certain GPA – this means that if you have the prepaid plan, and you earn the scholarship he’ll get money back from the state since the scholarship will cover part of the prepaid amount. Pretty sweet deal!

    1. It’s on option, but moving across country is not for us.

      What if your kid doesn’t want to go to University of Florida? What happens to the money then? Hopefully just get it back?

      If so, that’s nice to have flexibility. But what if your kid can’t get into Florida?

      1. California Expat

        It can be used at any Florida university – Univ of Florida, Florida State, Univ of Central Florida, etc., so lots of choices. If you don’t go to a Florida University you get the value of the prepaid plan that you can use anywhere, but obviously you’d have to pay the difference so going to a Florida university is the optimal move.

        1. Gotcha. At least you have the option of getting your money back with no penalty.

          University of Florida has climbed up the ranks over the years at #28, FSU is ranked #51 and #124 for UCF.

          Maybe that’s the thing… parents need to lower their expectations. I have this concern that paying for a non-top 25-ranked college might be a big waste of time and money. Instead, better to go to trade school or learn to code at a coding school, or be an entrepreneur.

          Are you worried about this ROI calculation?

          Related podcast: Duke, Baruch, Or Nothing

          1. Rustin Cohle

            Interesting post. Hypothetical idea – if your children are in the “average to slightly above average” side of the bell curve, why save up the entire amount to attend an Ivy or flagship university? Im going to encourage my children to attend community college for 2 years to figure out what they actually want to pursue and transfer to a public university. In some ways it seems a better idea to buy your children a house to launch their educations/careers than encourage goofing off freshman year of college paying full price for 101 level courses

            1. I think it’s because average kids make average decisions and get average results.

              The only colleges they might be able to get into our tier 2 private universities because the public universities in California are all impossible to get into nowadays.

              I wouldn’t mind I’m going to a privateer to University if that university provided for a tremendous free aid. This is one of the things I’m hoping for, but not counting on.

              Going to community college rod for two years, and then transferring is at the top of my list. But getting my kids to comply with this idea is an unknown.

          2. I was gonna say something similar but he beat me to it.

            In 2013 tuition at UF was $6263, in 2023 its $6380.

            Now obvioulsy that doesn’t include housing or food, but those costs exist whether or not you goto college.

            If OP finds his kid living in his finished SF basement in 12 years, you still gonna be paying for food and housing on those kids.

            1. That tuition is so cheap, awesome! I think I just checked Berkeley’s tuition and it is only $11,000 for in-state. That’s a good bargain. It’s just impossible to get in nowadays.

  28. Curiousgeorge

    FS – Can you explain to me what value you see in your kids even going to college?

    With internet and gig economy, theres nothing the college provides that would justify the cost and the opportunity cost of four years there.

    For someone like yourself you have built a thriving internet business via Financial Samurai, why wouldnt you teach your kids the tools need to go off on their own via internet based business? Same goes for rental properties – give them the money you would have used to pay for college to kickstart a RE biz.

    Furthermore, many tech companies and large corporate companies dont require college degrees and expect that number to grow in 12 years

    Love to hear your thoughts

    1. Sure, check out point #4in the post on what I plan to do to help my kids make a better decision and afford college.

      Did you go to college? If so, what are your thoughts about sending your kids to college and how are you going about saving for it if that is your plan?

      I’m really curious to hear how other people are saving for college and their thoughts.

      I am diligently saving for a college as a Hedge that college will still be necessary to survive in society in 12 to 14 years time.

      1. Curiousgeorge

        Yes i did go to college but 18 years ago and the world was different. Using the argument that i went to college so my kids should is largely moot because we needed classrooms to learn the material back then. Now you can click a couple buttons and learn concepts better and faster today.

        Your point number 4 still implies you are sending your kids to college, just with more skills than the average

        My question is why even do that? You say its a hedge but your seeing countless examples of folks that have built internet businesses today with little to no college experience and others who went to college have used very little that they learned. So now lets fast forward 12 years from now for son, it will be even more prevalent

        1. Agree. It’s so easy to click some buttons, learn, and make money today. I wonder why everybody isn’t doing it?

          So what are your plans for your kids and college? And if you don’t want them to go to college, have you been able to convince them that that is the right decision for them?

          Your perspective is appreciated.

        2. I’d love to hear your thoughts as well about whether you will be sending your kids to college or not.

          I am, but will try to go to the public university route.

      2. I think what he is getting at is the question of at what point is it no longer worth it to go to college. Based on the way the article is written, it seems you endorse $90k per year for private as reasonable, with the caveat that you do promote the value benefit of going public. What is not addressed is whether no college at all is a viable alternative to paying these costs, or at what point the costs will get so high that it tips the scales. For instance, maybe you could give an opinion of what you think would be too much to pay for private college today – if not $90k per year, maybe $120k per year you could say “no way” to the idea of the masses heading off to private colleges. Also, perhaps a cut off where entering a potentially lucrative profession like medicine or law is also no longer worth it due to the high up front education costs.

        1. It would be nice to pay no more in total tuition than the expected income after graduation. But that’s only feasible now with grants and scholarships.

          What are your thoughts about sending your kids to college and how are you planning on saving enough? I’m hoping to get more perspective from readers on what they are doing because I already know what I am doing so far.

          But I might change my mind with your help!


  29. Sam, love your stuff. I am somewhat perplexed about your position on private education. I can’t remember if I’ve seen an ROI analysis of yours on public vs private education, but you yourself are a great example of coming from a public education and being able to be competitive on walls st. Certainly you felt like you could compete with the private school kids in your stops at these investment banks. Perhaps you are placing value on the perceived “easier” path or entry points for such opportunities, or you feel like you are an outlier.

    But mostly, I am trying to think of a world where the offspring of the Financial Samurai willingly chooses a private education after having been pounded their whole lives about the true value of education. You are a value guy through and through I feel like. Can we ever justify a world in which higher education at 7 figures makes sense? Maybe for medical school. Less and less for law school. You are all about fulfillment and maximizing happiness, so how is it possible your kids would fall into this middle class trap that you’ve worked hard to get out of?

    1. Thanks. The older I get, the more accepting of the fact that I cannot control outcomes. So instead, I end up, focusing on inputs.

      There are too many variables to consider which are out of my hands. I have spoken to many older parents, who had wished their children went one route, but ended up going a different route.

      I also write this post in hopes that some university administrator out there or some politician, reads it and realizes the ridiculousness of the cost of getting a college education today. Maybe the college administrator will feel guilty for the middle class or maybe the politician will reduce laws that force administrators to Prices, or guarantee a minimum income job for all graduates.

      But enough about me, what about you? How do you plan to save for your children’s college expenses? What are you Budgeting and what are they thinking? Thanks.

      1. I am saving, albeit in an after tax account. My state does not have a competitive 529 and apart from budgeting for a state level school, I will be pushing my two girls hard toward CC and then matching their undergraduate and graduate aspirations against the earnings potential in their field. Want to be a poet? Awesome. Better get that scholarship to Harvard. Higher education is such a racket. This from someone that went to some good programs. What these kids are up against is simply unsustainable, and I don’t think we have yet to see the full effect of knowledge work moving offshore or being supplemented by AI. I work with some very smart people (devs, product, marketing) in overseas markets making a fraction of what the American wage is. I am truly worried for the American middle class. I always am impressed by your planning Sam, keep writing

  30. This is a great conversation to have, but there is one topic I see excluded from most 529 discussions, and that is how they are purchased and the effect that has on fee structure and overall benefit of a 529: direct vs. through a broker or RIA. To me this is super important because the 5% sales load frequently charged by a broker, plus potentially higher fees from actively managed investments vs. passive funds, might offset most of the advantages of savings via a 529 plan vs. a taxable brokerage account. I’m curious if anyone else knows of any additional resources looking at the fee/expense structure since most individuals don’t have access to a Morningstar subscription (https://www.morningstar.com/personal-finance/how-do-your-states-529-tax-benefits-stack-up).

    This is the best I can find: https://www.forbes.com/advisor/student-loans/compare-529-plans-by-state/

  31. My 529 plan savings started aggressively with a John Hancock Blue Chip Growth Fund in 2008.
    My back up plan is our Trust account, which holds proceeds from a home sale ten years ago.
    We have enough to cover eight years of private college tuition starting with our daughter in 2022 and our son in 2025.
    I estimate that we will spend about $700k total by 2029 for two private college educations.
    No genius here – just saving and staying aggressive the whole way.

    1. I’m wondering whether you had to talk with your daughter and son about attending Amore affordable public university instead? And how did that go? It feels like paying for private university tuition for universities outside the top 25 doesn’t seem like a great trade. Thoughts on this?

      You forgot the other two options, besides geniuses, rich or poor.

      Do you mind sharing your net worth to be OK Spending $700,000 on private university tuition today? Thanks

  32. Sam
    Seems to me it may be better to have a custodial Roth IRA acct bc it’s not subject to FAFSA.
    529s limit financial aid

  33. I have put into Washington’s get credits, a 529 and rental properties I plan on leveraging to help pay for college I have 3 kids aged 17,13,11. I’m 44 years old.
    We have encouraged our kids to take college credit high school classes and running start which really helps reduce the credit costs later.
    I also want my kids to pay for part of their college it makes them want it more with skin in the game.
    I am grateful my parents helped me with half my college and it has enabled me to live a very good life, financially secure and much better off than my parents were. I hope the same for my kids, and the fact they will inherit all my real estate, I want them to be educated enough to run it successfully and hopefully do better than I have done.
    The bar is a lot higher for them, but they are starting with 10x what I had.

  34. Hi Sam,
    I know you are concerned, but I honestly do not understand the angst.
    Both of my sons attended CA community colleges, transferred to UCLA and Berkeley, and will graduate this spring and summer. Community college was essentially free, since they continued to live at home and scholarships paid for 100% of tuition and books. My sons are solid 3.8+ students, but not geniuses by any measure. We funded their 529 plans annually from birth to 15 years old. They will both graduate with 529 balances over 35K each, which will eventually be rolled over into the IRAs.
    As a community college and Berkeley grad myself, I do not understand the stigma of community college. I believe it is a great bargain and allows uncertain 17 and 18 year olds to cost effectively explore a range of topics, prior to declaring a major, moving on and finishing a degree.
    Hope this helps.

    1. Hi Ron – the latest UCLA and Berkeley acceptance rates are around 9%. Do you think it would be wise to expect my children to get into these schools? In 12-14 years, I expect the acceptance rates to decline to 5%.

      I’m all for community college and transferring. See this post. Was it difficult for you to convince them to go to community college?

      We are average intelligence people. They might need to even score higher on their tests and grades to have the same chance as others.

      If you talk to other parents or students applying to college, as I have, I don’t think it’s wise to just expect kids to get into schools like UCLA and Berkeley.

      What do your kids do for a living?

      1. Hi Sam,
        I acknowledge the low acceptance rate to schools out of high school. I don’t know the stats, but kids with a 3.5+ gpa after completing 2 years of community college have a much higher acceptance, over 50%.
        One son will graduate as a mechanical engineer. The other as a business econ major.

          1. Very first search result for me was here: https://admission.ucla.edu/apply/transfer/transfer-profile/2022

            It says there that 27% of California community college transfer applications were accepted to UCLA for 2022.

            Here’s one from UC Berkeley for 2019: https://admission.universityofcalifornia.edu/campuses-majors/berkeley/transfer-admission-profile.html

            Says that 26% of transfer applications were accepted, with 95% of admitted students coming from California community colleges.

            So, not 50%, but not terrible odds compared to going straight out of high school.

              1. Thanks Mark and Sam. I meant to include a question mark after my 50% guess.
                I’m 53, so its not relevant for 10 – 15yrs from now, but it is a data point. There was a simple transfer agreement in writing with my community college that my sons no longer had: Get a 3.5+ or higher at the community college, get a seat at Berkeley. My major was Engineering and I worked my a** off due to my average intelligence.

    2. Ron – I too went the community college route and transferred. My brothers did the same. I’m not sure why there’s a stigma, but as 1st generation Americans we didn’t see it that way. We all lived at home for a year after completing high school, and as you mention, it was essentially free compared to starting at a 4-year. The 1st year of most programs are primarily gen eds, so why not complete them for a fraction of the price with smaller class sizes? The degree earned is what ends up on resumes after all. My siblings and I are all doing well in our respective careers and I’m grateful to experience college with two lenses.

    3. Randy Petty

      Ron – I think you’re spot-on in suggesting community college as a practical, low cost option toward an eventual four year degree. I went this route in California (my folks were not in a position to provide financial assistance) and then transferred those credits to the University of Oregon (following four years service in the USAF that included Vietnam – I had a low draft lottery number so I enlisted rather than be drafted) and then went on to graduate using my GI Bill education benefits and a part time job and went on to a successful career in hospital and academic medicine management. Today I’m comfortably retired. I argue many parents and their children today carry a degree of academic snobbism convinced the only route to future financial success is pursuing a degree through a prestigious and high cost academic institution. In my career I found most of my colleagues in the c-suite came from everyday families and graduated from public colleges and universities while working part time jobs to help pay for it. Their long-term career success was accomplished through long, hard work; continuing professional education, and developed leadership and interpersonal skills – not an academic pedigree. For everyday families your suggestion is a wise and practical route to consider.

    4. Ron, I wonder if you are suffering from “survivors by us” like successful entrepreneurs who hit a big and just believe everybody else can hit it big as well.

      The acceptance rates and UCLA and Berkeley are incredibly low. The vast majority of students who apply do not get in. So I would agree that it is foolish for any parent to just expect their kids to be able to get into one of the schools.

  35. I don’t disagree that college may get much more expensive in the future but I am starting to see signs of a buyers strike as the costs have hit a tipping point where the value just isn’t there. College enrollment has been declining at a rate of about 1.6% a year since a peak in 2010. Government debt may make the unlimited loan spigot slow down though the expansion of income driven repayment and forgiveness plans may mitigate some of this. Overall I see the tuition inflation slowing to likely match overall CPI from here on, say 3% a year. I am committed to helping my children get a good education and not be slaves to debt but there has to be a limit. I am doing the max 18k a year contribution at a nice even $1500 a month set and forget and let the chips fall where they may. That’s around $538k in today’s dollars at a real rate of return of 5%. More than that we can do cash flow if working, student debt or just encourage alternatives such as (gasp) public school or second tier private where merit scholarships are easier to get.

    1. I hope there is a revolt that will bring tuition price growth down. Alas, I doubt it b/c American universities will just accept more rich international students who are willing to pay whatever full tuition they charge.

      I added an inflation chart in the post. There is no way the trajectory will match overall inflation any time soon.

      1. Christine Minasian

        Yes Sam- there should be a revolt! We’re in our late 50s- after putting our oldest through BU (worth it I believe). The last 2 still in expensive colleges. We worked since they were babies saving knowing this was coming. It makes the whole college experience much more enjoyable when you’re financially ready. You’re forgetting the other ugly side of college- college apartments. It is a racket! We’re paying $1600-$2000/month for rent for our kids. It’s disgusting that these colleges made so much money -they invested in student apartments! So yes, PLEASE lead the revolt. We see our friends unable to retire and/or borrow a lot of money to put their kids through.

        1. Congrats for making it through! I wish your children the best post college.

          I am going to revolt by teaching my kids everything I know about business, rental properties, communication, and Mandarin. My hope is that my kids will know enough that they’ll feel comfortable not blowing all the money on an expensive college and accept the financial difference I’ve saved up by then and go to a cheaper university.

          Let’s say I’m able to save up $650,000 per kid and they go the cheaper public uni route for “only” $350,000 in 2036-2038, I will give them the $300,000 difference to launch their lives or pay for their own child’s college education.

          Maybe that’s too much money in a 529 plan or elsewhere. I’ll make a game time decision!

            1. I’m curious, because you are farther along in the parenthood stage, at what point did you come to peace with having to pay so much in college tuition? I am wondering when I will come to peace with this big expense. And I’m trying to figure out whether it’s when I reach a certain net worth, a certain age, or have a special conversation with my kids. Any perspective is great. Thanks.

              1. Just a note of our own situation… My daughter in college now… When she was born 20 years ago, we started the 529, and by the time she entered college, we had about 250k, which by now has been enough to pay for out of state college… She’ll graduate with funds leftover

Leave a Comment

Your email address will not be published. Required fields are marked *