Posted by: Kate Ashford | January 27, 2012

My College Savings Stress, Solved!

Dollar Bill Yo-Yo

Because this yo-yo is made out of money, but I am not.

I write about personal finance, so I know how important it is to save money for your children’s college education. (As long as you’re not doing it to the detriment of your retirement account, of course.)  I talk to financial planners several times a week, and I know that the key is to start early. START NOW. I get it. I do.

So I’ve been a little stressed out that we haven’t managed to be more aggressive about college savings for our two girls. But we live in New York City, and frankly, it’s expensive. It’s beyond expensive. It’s nuts. And the amount of money we spend on basic fixed expenses—rent, daycare—is outrageous.

And then it hit us. We spend a lot of money on daycare. We spend more money on daycare than we do on rent. (Those of you familiar with NYC rent numbers will understand that our monthly bill is not insignificant.)

But daycare is not forever. At some point, these girls will enter school. Public school, if we can help it, which means we’ll no longer be paying for daycare. Which means we’ll have THOUSANDS to funnel into their college savings funds each year. If we save even half of what we’re spending now, we’ll have a sizable college nest egg by the time each girl is ready for collegiate life.

But could it be that easy? Is it just a matter of redirecting the money we’re already spending? And if it’s that easy, why doesn’t everyone (who pays childcare expenses) do this? And is it okay that this savings strategy won’t kick in until the girls are 5 years old?

I asked a planner friend of mine to weigh in.

“That sounds like a great plan,” says Ted Toal, a financial planner in Annapolis. Most people, he says, are more likely to dream about how they’re going to spend their newly freed-up money, not save it. But this strategy can work with anything. “Let’s say you have a car payment of $500 a month and you pay the car off,” Toal says. “Don’t spend that money. Start saving it. Put it into a savings account. Put it into an investment. Up your 401(k) contribution.”

The takeaway? This could work for us. And I’m no longer stressed about saving for college, because the money is already in our budget. And when the time comes, we’ll just shift those payments from “daycare” to “529 plans”—with maybe a little bit earmarked for “weddings.” Because we do have two girls, after all.

What’s your college savings strategy?

(Dollar bill yo-yo from felipejcontreras on Flickr.)


  1. I love this idea. While I never had to pay for day care since I was a Stay-at-home mom, so many of my friends counted down the days to spend their daycare tuition somewhere else. I think this is a great “shift” for the money. Happy saving!

    • We, too, will be counting down the days, since I hope we won’t be shifting *all* of the money into savings. (It’s a huge chunk!) But even if we only shift half, it’s going to make paying for college so much easier. (I hope!) Thanks for the comment!

  2. Reblogged this on Learn From A Teacher and commented:
    While I was a stay-at-home mom before my daughter was able to go to school, I remember hearing so many of my friends count down the days until they could stop making daycare tuition payments. Shifting the money into a college savings account as soon as children enter school is a great way to try and combat the high costs of higher education today.

  3. Wow, that sounds like such an easy way to look at it! I love it! It’s really just replacing “current childcare” with “future childcare” in your budget.

    • I’m sure it’s simplistic, as a friend of mine (with older children) has already pointed out. Even in public school, there are activities and summer camps and things of that ilk that take money. But it does seem like we’ll be able to put a sizable chunk away once daycare is off the books. Thanks for dropping by!

  4. While my husband and I are childless right now (and who really knows if we will ever have kids, were only 25), but I think this is a great way to stay motivated and be able to meet your goals.

    It’s kind of like saving your raise or bonus every year. Some people just can’t wait to spend the increase & upgrade their lifestyles with continual payments and that the money just disappears. They forget how they got by without smart phones, flat screens, and nicer cars.

    But if you have a plan for your money before its “free” you have a better chance of actually saving it!

  5. […] Her Two Cents discovered an awesome way to save for her girls’ college education! Basically, she figured out that she can replace “daycare” with “college […]

  6. Not so fast. The big surprise is that after the daycare bills are the exorbitant costs you will pay for an after-school babysitter, days schools is closed, early dismissals and “camp” daycare during the summer months. In my experience, the daycare fees ended up being repurposed for other necessary childcare. And that’s not even taking into account costs for after-school activities. To my recollection it wasn’t possible to save ANY more after daycare. So, good luck with your plan.

    • I know that there will be some significant expenses that will arise, but we’ll be shielded from many of them due to my job. I freelance from home, so I already deal with daycare vacation, sick kids, and snow days by working around it–I don’t have to hire help. When my girls go to school I’ll work while they’re in school, so I don’t anticipate needing after-school help. That said, I’m luckier than most to have that flexibility, and I know that a lot of other parents can’t count on that.

  7. I think this will help get you through the night, but it isn’t reality. Because this assumes that the only thing you pay for with your children is their education. As they move out of day care you’ll move into…piano lessons? Other? Etc…and mind you, if they are any good, you’ll want them to be in some sort of competitive endeavor (sports related or not) and this costs also. They also keep growing. One year (and our son is only 13) he went through four sizes of shoes. So that is 4×3 = sneakers, other shoes and church shoes. And of course, it wasn’t just his feet growing.

    I think you need to establish what a minimum is and know that every year this is what I need to save and at that threshhold, at least you’ll have much less stress.

    It will never be enough. I have a daughter also, I don’t believe that I can save enough for both college and a wedding!😉

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