I just started funding Mini’s 529 this year with goal of maxing out first 2 years @ 14k each. I’m front loader in all things I deem worthwhile: studying, investing, or building businesses. Since Mini can be heading to college in 9 years (if she doesn’t decide to take a sabbatical from school to run a business venture), the investment that gets to be truly impactful/fruitful will be the dollars that gets to grow in the stock market for the longest.
If I max out in 2016 and 2017, the principle of 28k can grow for about 7-8 years, which means based on the rule of 72 (+ assumed annualized return of roughly 8-10%), the 28k gets a chance to roughly double by year 2025 when Mini starts college.
Ok, so that’s 56k for her college. Not a whole lot, considering some financial advisers are encouraging my attending radiologists in my residency programs to save >1/2 million for each of their kids’ college expenses. (I whole-heartedly disagree with advisers who recommend saving >1/2 million for each kids 4 year college, and think that it’s likely an Asset Under Management motivation on the adviser’s part, but that’s discussion for another post).
So Mini gets optimistically 56k for college from the 529 I started this year; what else is she going to do to ensure debt-free-ness after her college degree?
- If she’s anything like her mom, she will work a job or 2, or 3, or 7…. Just kidding. While I in fact did work 7 jobs simultaneously for a few semesters in college, I do not think it is a healthy practice. Mini can work one or at most 2 jobs, but not 7.
- If she’s nerdy like her dad or mom or aunt or grandfather, she can tutor and make a killing. I started with $10/hr at 16, up to $400/hr at age 28. In college, I charged anywhere between $20-$200/hr for helping others achieve academic excellence and further mastering my fund of knowledge.
- If she’s jockey like her dad (who was a near-Olympic level rower at an Ivy League University) and she learn to negotiate with college financial aid offices, she’ll likely get a full ride sports scholarship.
If she continues her business ventures that she’s started as a mere 8, 9 year old, Mini’s money will work for her like no tomorrow (money invested doesn’t take a vacation, doesn’t get sick, doesn’t sleep.) Mini’s current money making ventures include:
- “Walkie Dogie” when business blooms a little, Mini will hire help and take a cut from each dog-walker/pet-sitter. Mini will be in Hawaii scuba diving with her parents while her diligent employees walk 10x neighborhood dogs than Mini could do on her own.
- Freelance Art: Mini has been selling (few, as DWM wants to hold on to her original art work) originals and replicas of her artwork, ranging from painting, sculpture, to photography. She will continue to apply herself as she’s naturally inclined to art; nicely the money follows when one does what she’s good at.
- Investment: Mini has saved 95% of her gift money & has been investing in her mother, Dr. Wise Money, getting 10% guaranteed return at the DWM’s bank. As DWM and Mini discussed adjusting down the guaranteed interest rate to a more realistic range 2-3%, Mini has decided that she will buy a couple shares of a few companies she likes and hold her shares to see long term gain. Mini has no desire to be a day-trader; in her own words, “it’s too much work and the money is not guaranteed for the hard work.”
- Summer camp business. DWM is starting a highly sophisticated summer camp for kids around mini’s age summer of 2017. Mini, mini’s dad will be DWM’s business partner. By the time mini starts college, she would have (helped) run the summer camp for 9 summers. She can continue and likely will take over the business ownership from DWM by then. This operation will likely bring Mini 10’s of 1000’s each summer after she pays her workers.
- For everything, there’s credit card.
- DWM’s credit card. DWM currently has 250k of credit limit in her credit cards combined. It would not be implausible to charge all of Mini’s college expenses on DWM’s credit, if it makes sense. Free flights to Hawaii, 5-30% cash back, lots of gift cards for dining, entertainment, & pretty much you can think of under the sun etc.
- Mini Wise Money’s credit cards. Like I said before, if you don’t stretch or work your credit/borrowing muscles, it ain’t gonna grow. DWM has plans to provide Mini with a monstrously high credit score & large credit limits to start in her early 20’s (setting her up to purchase homes, left and right as soon as she gets her first good paying job. which may or may not be After college given that Mini has her money working for her at the tender age of 8.)
- Though least preferred by DWM, DWM can always step in and pay a bit of Mini’s college with her paycheck 🙂 DWM can afford to cash flow Mini’s college expenses as by the time Mini’s starting college, DWM would have already achieved financial independence (2023) for 2 years, which means, all DWM’s income after 2023 is NOT necessary for living but cream on the top. Since DWM doesn’t plan to retire at age 40 even though she could at 38, DWM will have plenty of cash flow to make the green papers rain, for a worthwhile cause… Mini’s education.
If it makes sense, Mini can also take out student loans (i.e. federally subsidized student loans for undergraduate education, where the student loan has 0% interest rate while student is enrolled in school full time). Upon graduation, when the student loan starts charging 6+%, Mini can look into refinancing with banks, pay off with her own savings in brokerage account, or pay off with 0% interest credit cards, and off course, last resort, there’s mom Dr. Wise Money to help.
- how will your kiddo pay for his/her college?
- are you saving like crazy for them? (As you can tell, I don’t think you need to. Better save for your retirement first.)
- did you know even doctor’s kids can get full-ride scholarship to small, pricey, private colleges? knowing what you are worth is an incredibly important skill.
Please share your insights, experience, & insights below.