Good. You caught me. Indeed, not saving from college from time to time is a bad idea. From time to time I come across parents who tell me they don’t skimp on college to increase the chances of their child getting financial aid. The view is that the availability of money allows colleges and the government to pay for tuition, so help is not needed. This is, to a limited extent, true. If you have millions in the bank, I prefer not to take tax dollars and not pay for your child’s college so you can spend money on first class tickets to Vale.
However, the notion that saving for college will ruin financial aid is short-sighted and makes many assumptions. The first is that your child will be provided with financial assistance. We don’t know which government will get help in 5, 10 or 15 years. You should also understand that most of the financial “help” goes in the form of loans. You are very good at creating a situation that makes it difficult for your children with heavy loans and they will find it difficult to return the money in exchange for a slightly better lifestyle. I wouldn’t call it smart financial planning.
Another reason that savings don’t hurt much when it comes to help is that the government knows you need to save more than just college. If you save on your own name rather than on your child’s (including 529 college savings plans and ESA Coverdell), less than 6% of the savings on these types of accounts will be credited to financial aid. Yes, it counts a bit with you, but not as much as a property in the name of a child of 20%.
There is a good reason not to save for college: you have more important needs for that money. Note, I’m not saying “if you can’t afford it”. This is because determining availability is often simplified to find out if there is money left at the end of the month. Most of us find ways to spend any available money. What we are spending on is perhaps a real life-giving need, but it may also be a dubious need.
So what can take precedence over savings in college? As a retiree, I enjoy seeing money at a time when you can no longer work. Of course, food, clothing and shelter are also provided for needs. But let’s face it: blue jeans can cost $ 20, $ 40, or more than $ 100. I think a couple of $ 100 is not considered a necessity.
After all, some people just won’t be able to afford to save in college without leaving a shortage in other vital areas. It’s not selfish, it’s just that. But for the rest of us, this is an area that deserves our attention.