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If you have kids, one of the main worries you have is how you’re going to be paying for college for them.  College costs have been increasing wildly.  So many kids are starting out their lives with huge student loans dragging them down.  Or worse, many parents are putting their home or retirement savings at risk for paying for college.  

I really worry about that.  So when our kids were young, we determined that we were not going in that boat.  We have 3 sons, so that could have a crash and burn, it worked out pretty well for us.  We aren’t quite done, but so far, we’ve been able to pay all cash for school.  Although our that our boys are unusually far apart in age – almost a decade each.  So we had time on our side and that’s important.

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Student loans aren't always necessary. With a little planning, you can have an all cash college experience.

Start Saving Early and Remain Steady

One thing we did was to start fairly early.  Even though we had very small amounts to work with, we were very regular about our college savings plan.  I don’t think we ever set aside more than $25 a week for paying for college.  It’s only $1,300/year in actual dollars.  But when you add the power of compound interest to it, over an 18-year time span, it can grow remarkably quickly.

When our oldest was just a baby, they had a savings bond program at work.  Back then, we got paid weekly and they would take $25/week to buy a $50 savings bond.  I thought that was brilliant, so I signed up for it right away.  Then I eagerly tracked my growing stash of savings bonds every week.

Keep in mind that 30 years ago, savings bond rates were a lot higher.  You’d probably need to find something better now, like a T-bill or an educational Roth account.  By the time that job ended two years later, I had over $2,000 in savings bonds.  Fortunately, I shoved them in a drawer and mostly forgot about them for a decade.  By the time our son was ready for college, they were valued at over $10,000.  Sweet!

He ended up choosing to go to a trade school rather than traditional college.  He was also able to get some grants and scholarships.  So we only ended up out of pocket by about $4,000 for his education, and we were able to easily cover that.  #1 was through his schooling debt-free and off to his career.

We also were saving up another $25/week in a more traditional savings program for our second son who was about 10 at the time.  That’s the key:

  • Start thinking about paying for college as early as you can.  Resolve to avoid the student loan trap if at all possible.
  • Save what you can – even if it’s only $25 a week.  Even on a tight budget, that is do-able.
  • Set up an automated savings program that you don’t have to think about.  Remember those savings bonds in the drawer.  If they hadn’t been such a hassle to cash, we might have been tempted to use them when things got hard.  But we never touched them.
  • Find a good investment plan that will pay decent interest in the long term with minimal risk.

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On the next page, we are going to talk about making great choices for college programs and getting scholarships.

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4 Comments on The Secret to Paying for College with All Cash

  1. Good points in the final comments.
    An education is only what you make of it. It can be a waste of money pretty much like anything else. It might help you get your foot in the door, but if we don’t step up and work hard, care about our work and the people we interact with and show passion for our job, we won’t succeed. College or any higher level education isn’t the holy grail to get us rich and happy like it is sometimes made out to be.

    • I think you’re absolutely right! It’s like the elderly couple next door – they spent more than $30,000 on a brand new state-of-the-art travel trailer. But it hasn’t moved from their driveway in two years and now they are in such poor health, they probably can’t use it. Just because you spent a boatload of money on something, doesn’t mean you’ll get that amount of benefit from it. You have to be strategic and smart about it and sometimes the best decision is just not to do it.

  2. My wife and I contribute $170 every two weeks to my son’s college fund. In the state of Virginia we are allowed to deduct up to $4,000 a year on our state taxes. So we figured we’d take advantage of the tax deduction while we can. Hopefully with compound interest that it will more than cover school and if not I hope that he can get some scholarships or grants.

    • That is SO smart! Just think of how far ahead you will be than those poor parents who just sign up for huge student loans without even thinking. Good for you – your son should be thanking you.

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