Okay. You caught me. Indeed most likely not saving for college is often a bad idea. Now and then I’ll come upon a parent who tells me it isn’t saving for college as a way to increase the chances their youngster will get school funding. The thought is always that having money makes colleges plus the government figure you can pay for to pay for college and for that reason no aid is required. This, to your limited extent, applies. If you’ve got millions secured I’d rather not have access to my tax dollars taken and used to purchase your kid’s college to enable you to spend the money on high quality tickets to Vail.
However, if saving for college will mess up educational funding is short-sighted and makes many assumptions. The first one being that there will be federal funding available for your kids. We don’t really know what the government should have in the way of help in 5, 10, or 20 years. You should also recognize that the majority of financial “aid” is within the form of loans. You wonderfully could be making a situation that burdens your son or daughter with onerous loans they may have difficulty trying to pay back in exchange for somewhat better lifestyle now. I wouldn’t call that sound financial planning.
Another reason why saving won’t hurt much on the subject of aid is the government is aware that you have more in order to save for than college. If you save as part of your name rather than your son or daughter’s (such as the 529 College Savings Plans and Coverdell ESAs) lower than 6% from the savings in those account types will likely be counted against federal funding. Yes it will count against which you bit, and not much as assets kept in the child’s name at 20%.
There is really a good grounds for not saving for college: You have more vital needs for your money. Note I don’t say “if it’s not possible to afford it.” That’s because determining affordability is usually simplified to seeing if there’s money left at the end on the month. Most of us find methods to spend any cash that is available. What we wait on can be quite a true life-giving need, but it also generally is a dubious want.
So what will take priority over college savings? Being a retirement planner, I like to see money set aside for the time when you’re able to no longer work. Of course, food, clothing, and shelter also feel like needs. But let’s be clear: choices $20, $40, or around $100 on blue jeans. I’m thinking the $100 pair doesn’t count like a need.
In the tip though, a number of people just won’t be able to afford to save lots of for college without leaving themselves short in other vital areas. That’s not selfish, that simply is. But for your rest of us, it is really an area that deserves our attention.