Do you remember as a parent how difficult it was to save money to help your children obtain a college degree? Maybe you’re facing that challenge right now. Or perhaps you recall the financial struggle you endured to put yourself through college. I hear the frustration of parents regularly when they come to me for financial planning. The cost is so formidable they feel defeated before they begin to save.

Photo courtesy @ IStockphoto.com/diane39

Seven out of ten graduating seniors start their careers burdened with student loan debt. CNN Money reports that the average student loan debt is $29,400. None of us want to see our children enter the workforce with loan payments due. Moreover, the cost of college rises an average of 7% a year, while most workers are lucky to get a 3% cost of living increase. That’s in a good year. The number of students in need of loans continues to rise as well. It’s going to “take a village” to help our kids go to school in the 21^st century.

How can we help the younger generation save enough money to send their kids to college? I see living giving as the answer. Anyone with discretionary income can participate and make a meaningful difference in the lives of their loved ones!

Living giving is the biblical notion that God entrusts us with resources to be shared when we see others in need. We find the foundation of living giving in Scripture, which states that those who sow generously reap generously. We know that God, our “seed supplier,” will continue to provide more as we share more. We also experience joy when we bless others with His resources.

Perhaps you believe it’s the parents’ responsibility to save for their children’s education. Even if that’s true, it doesn’t change the fact that the cost of a good education is so out of reach that it’s going to take more of us to help. I invite you to engage the spirit of giving, and for the sake of our children, let go of that debate. I want you to taste the joy of releasing resources that are not ours to hoard, but His to give.

Let me introduce a wonderful college education savings tool, the I.R.S. 529 Plan, which allows anyone to open an account on behalf of a relative, friend, or themselves, using after-tax dollars while the earnings grow tax free. The owner of the 529 account maintains control of the purse strings, which means that you are not legally required to transfer the funds to the beneficiary. If the beneficiary never goes to college, the owner can rename the beneficiary to another relative who will likely go to college.

We can help our family members succeed in putting their kids through college through living giving. Here is the plan:

1)      As soon as a baby is born, contact your financial advisor to start a 529 plan and fund it with a portion of your discretionary income over the next eighteen years.

2)      Let the parents and extended family of the newborn know you’ve opened a 529 plan so that birthday and Christmas money can be deposited there to build the college fund.

You can open a fund for as little as $250 in some plans, or even $25/month as an electronic funds transfer. If monthly funding doesn’t appeal to you, you can invest a lump sum at any time or any level. Now let me put some numbers to this so you can see the power of compounding through your generosity as soon as a newborn arrives.

In the chart below, I’ve assumed that multiple family members helped to jumpstart a 529 plan upon the child’s birth, and then contributed to the 529 plan with birthday and/or Christmas money, either on a one-time basis, annual basis, or monthly basis.

(You may download this table with 15 seconds of patience: 529 Calculations )

If enough family members gifted $1,000/year to contribute to the 529 plan, there would be approximately $55,719 in the college fund. Or, if enough family members committed to a total of $100/month, there would be approximately $58,196 in the college fund. This amount would get most kids through a four-year degree plan at a public university, even with the average annual 7% inflation already factored into the calculation.

Here’s another idea to consider. What if you want to do some living giving for future grandchildren? Or what if your son has just gotten married and has indicated an interest in more education? Why not start a 529 plan for him and name him as the beneficiary? If he doesn’t end up pursuing a graduate degree, but instead starts a family, you can rename the beneficiary from your son to your new grandchild. This idea allows you to get ahead of the curve on funding for college education for a grandchild who hasn’t been born yet!

As you can see from the above tables, if you fund the 529 plan as soon as the baby arrives, you take maximum advantage of compounding in the stock market. If multiple family members choose to share their discretionary income, God will multiply His resources.

College education costs are not going down, nor is the stress mounting on young parents who want their kids to have the same opportunities for education as they did. It’s never too late to start saving! Every dollar counts, so let’s ask the Lord to help us bless our young family members who will likely go to college someday. We have only one life to give, so this is our chance to share God’s resources with others. May the joy be all yours!

   I would love your feedback on this idea. What do you like about it, or not like about it? I will embrace your thoughts as your contribution to make sure I have thought through my ideas well as I write my book!

Blessings,

Lee Ann

Here are the resources for today’s post, in case you’re interested in exploring these ideas further: 

http://money.cnn.com/2013/12/04/pf/college/student-loan-debt/

http://www.bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

http://www.irs.gov/uac/529-Plans:-Questions-and-Answers