Here we are at baby step #5, saving for your children’s college. As you likely know, Mr. Ramsey’s guidance is to work on steps 4, 5, and 6 at the same time. He does keep this step more vague then the others due to the differences in family circumstances, from those who do not have children to those who have a boat load, creating a much bigger challenge in saving for college for the entire brood.
Most of what we’ve read, heard, and watched from Dave himself about this part of the journey implies it’s a non-negotiable step if you have children. This is concerning, as everyone’s situation is different. To be fair, Chris Hogan, one of the “Ramsey Personalities”, has shared on more than one occasion that one size does not fit all and, furthermore, making sure you can afford to retire should take priority. Amen to that!
There are so many people out there who are struggling just to make ends meet. They are dealing with unemployment, underemployment, illnesses, and so much more. Once they FINALLY reach baby step #5, they may be well into middle age and need to save more than 15% of their income just to make sure they will retire with some semblance of dignity. Not only are many playing catch-up on saving for retirement, they also need to pay off their home before they retire; steps 4 and 6 may take all the extra money they have, leaving them feeling guilty and defeated that they cannot provide their children with a paid for college education.
While we agree that saving to send kids to college is a great thing, it is the lowest priority of the three steps you work in unison (4, 5, & 6) and, quite frankly, it’s optional. Your children have the rest of their lives to work and save. No matter how old you are, as a parent, you have less time. For those of us starting late in the game, with special circumstances, it just may not be in the cards.
Again, we aren’t trying to discourage people from saving for their children’s education. Anything is better than nothing. We opened a savings account for each of our children when they are born; with each additional child, we were able to put in less and less. Later, illnesses arrived, and putting money into those accounts was no longer possible. Now that our kids are older — three of the four are working — they have the accounts as a small foundation to build upon with their own savings.
We currently have one child in college, and he has chosen to live at home, work, and go to school at a local community college to complete his core classes. This is working out well for him and has allowed him to save a tidy sum from his part time job; with careful planning, he should be able to avoid the college debt trap altogether.
If saving for your children’s college is something your family is able to do, there are several savings vehicles available which we will touch on that in a future post.
Until then, make sure you put your financial future first. Having a paid off house with sufficient retirement savings will be a benefit your children in the long run.