I’ll never forget my parents’ laughter after I asked them how much money they had put away from me in my college savings account. “Nothing.” They said. My jaw dropped and tears welled as I asked how I’d be able to go to college. “You’ll take out loans. Or get a scholarship,” they explained. 

Even though I attended a private University I was fortunate to avoid college debt. At least by the time I graduated. I picked a school that has subsidized tuition and my fees were significantly lower than most colleges. Fortunately, my husband and I were able to earn multiple scholarships, take out some small loans, and work to help fund our way through college. I think it taught us a lot. And we grew a lot through that process. 

Now we have three kids of our own we are thinking about what their future might look like. We don’t know if college the right path for each of our kids. My husband is adamant about them not going just for the sake of going but having a real purpose in getting a degree. I had it drilled in me that I would be going to college. Nevertheless, right now, we want to be prepared and help them save just in case. So they can hopefully avoid college debt. Between 529s, IRAs, savings accounts… There’s a lot to consider! Fortunately John Hancock financial advisors are so helpful when it comes to navigating these different options. And explaining them in a way that makes sense. Now we have new hopes and goals for our kids’ savings accounts. 

Our Plan to Help Our Kids Avoid College Debt

529 Savings Plan

One thing I didn’t realize was that with a 529 college savings account, that funding can be used for all kinds of educational expenses. Such as books and materials along with tuition, and sometimes even room and board. Also, the account can be passed on to another beneficiary. So if your child doesn’t wind up going to college, or if they get a scholarship. You an even pass it on to your grandchildren!

If you wind up using the money for something else you only pay a penalty and taxes on the earnings that your savings generated through the years.

Roth IRA Plan

A Roth IRA retirement account may seem like we’re getting ahead of ourselves, but I can’t stop thinking about what a huge head start we’d be giving them. I didn’t open my account until I was 29. They’ll have a 20-28 year head start on me!

The positive about a Roth IRA is the flexibility of what the money can be used for. College, retirement, a home. In order to contribute a child does need a form of earned income though so that can be restricting. But for our kids, since they’re employed by our family business it’s a possibility. The main downside we see right now with a Roth IRA is the idea of them having complete control over it when they turn 18. But hopefully with a lot of good financial discussions that won’t be a big deal.

We already have savings accounts for our two oldest. Our immediate goal is to start a third for Lee Lee this year. And open Roth IRA accounts for each of them. We also would like to start a 529. John Hancock’s website has a great 529 calculator. I found it helpful to set a target date and figure out contribution amounts and what they could grow become. 

My husband and I are trying to find a good balance between paying off our home, continuing to save for future expenses and our retirement. For now we feel like we can contribute some to their savings accounts. Because even just a little bit of help now could possibly make a big difference later on. I know it would have for us. 

When we got married 14 and a half years ago, I had less than $100 in my bank account. The car I drove was falling apart, but it had dang good gas mileage. We worked early morning custodial jobs at our university before class. We were love struck poor college kids with big dreams. 

14 years later we bought our dream home putting 51% down, and we have hopes to pay it off within 5 years. I’m sharing a bit more about our journey from point A to point B (more like A to J) in a series sponsored by John Hancock. John Hancock offers financial strategies for people. They can help you work out a plan for your future. It’s something that would have been so helpful for us early on. 

Over the years there are a handful of highlights to our story that I think got us here. 

Embracing our lack of wealth

Early on in our marriage we learned a lot through trial and error. We tried to be smart and we did our best to follow some of the financial rules that seemed most obvious. Such as avoid debt. Even if that meant postponing my big dream of having a fancy car. In fact, I had pictures of a Toyota Celica pinned to my cubicle to motivate me during one of my telesales jobs. I never wound up getting that dream car, or the next, but it was ok. My husband and I knew what was most important about our cars was that they were reliable, then that they had good gas mileage. 

Our kitchen set when we first got married was literally a cardboard box with two folding camping chairs we got as a wedding gift. Later we were gifted an old table from my husband’s grandparents and we were so thankful. 

We weren’t in a rush to have “nice things” during or right after college, but we hoped to get there eventually.

Living below our means

We barely made over minimum wage working between classes. It was like this for a good 3 years. One thing we did during this time was keep a strict budget and keep track of every little thing we spent money on. We put cash in an envelope for each spending category: Food, toiletries, entertainment and so on. Anything we had left over at the end of the month we could save or splurge. More often we saved. It wasn’t much at first; just a few dollars here and there. But eventually we were able to save more and more. As our incomes increased we tried to keep our expenses about the same. 

We continued to try to do this as much as we could through the years, eventually being able to live off of one income and mostly save the other. About four years into our marriage we bought our first home. A condo in a little town called Springville, UT. Everyone was talking about investing in real estate. The marker was booming and I was worried we wouldn’t be able to afford a place if we waited. Unfortunately we bought the place right before the market crash, then moved across the country to Austin, TX when I got a job as a reporter. We briefly tried to sell the condo with no luck, and instead decided to rent it out. 

Learning from our mistakes

You’d think this was a great investment but our rent didn’t even cove our mortgage. We spent years pouring money into that place and never wound up making enough to cover the mortgage + HOA fees each month. Not to mention repairs. To this day my husband says buying that place was our worst financial decision, and I think it’s made him adverse to moving and real estate purchases in general. 

Eventually things turned around and we were able to sell it before buying this home, adding a decent chunk to our savings that maybe almost covers everything we poured into it for 10 years.

Although we had no way of knowing the market would turn, I think that “bad” decision helped us make better ones going forward.

We also learned a lesson about buying cars the hard way. In college we made a decision to take out a loan for one of our cars right before I graduated college. We needed a reliable car so at the time it seemed like a smart decision but it took longer to pay off than we anticipated and we wound up paying way too much interest. Going forward we’ve always saved and paid cash for our cars. Never spending money on credit cards we didn’t intend to pay off at the end of the month. Continuing to live below our means in case one of us lost our jobs (which has also happened before).

Learning from others

Neither of us had wealthy parents or some fancy upbringing. In fact, we’re constantly in awe of how much more our kids have than we ever did. I remember my parents laughing when I asked how much was in my college savings account. It wasn’t something they were able to plan for. 

We’ve had to learn a lot as we go. As a wedding gift I believe, someone gave us a small book about financial wealth. Early on that helped us set our framework about the way we’d live. Thankfully we both agreed we’d do our best to stay out of debt and keep our expenses as low as possible. Over the years we’ve read some other books, and done our own research about money. But sometimes it’s really nice to just talk to someone. 

I recently had a chat with a John Hancock financial advisor and she was able to help me distinguish the difference between some things I’d been confused about, and after that conversation I was able to flush out some of my other financial goals for this year. 

New goals

First up I want to open a specific long-term savings account for each of my kids. They already have regular savings but I’d like to open some with higher yield returns. I still haven’t decided yet if these will be IRAs or 529 college savings plans (or both) but I plan to figure that out this year and do that. 

Next, I want to make sure my husband and I are maxing out our retirement accounts as best as we can. I remember taking a personal finance class in college and thinking I needed to open a retirement account ASAP. Unfortunately it took me awhile to get around to it, but I did do it before I turned 30. Now I want to make sure I contribute as much as I can this year. 

Finally, I have a goal to pay our one loan (this mortgage) off within 5 years. It’s ambitious but I think it’s possible. The main reason I’d like to do that is because property taxes here are really high. Almost mortgage high. Thing is I’d like to be able to comfortably pay it down by 1/5. Comfortably being the key word. We’ll see if we get there. 

I’m planning to keep you posted each month in this series. As well as share some things I’m learning along the way. 

I’d love to know what your goals are for this year or the future. Stating them out loud helps, and I’d love to be your sounding board.