“They have lived in the same house in New Jersey for 50 years and they don’t throw anything away.”
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“I don’t want to make promises I can’t financially live up to. I own my own house and struggle to keep that in order.”
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Jared Young has been thinking about paying his children’s college tuitions their whole lives. Longer than that, in fact.
“Before they were born, we were thinking about it,” says Young, 52, of Castalia, Ohio.
With two children in college now and two children in high school, he and his wife Jody have their hands full in finding enough money for multiple college tuitions. The good news is they started saving when the children were babies.
“I set up a 529 plan for every one of them,” Young says.
Whether you started saving early like the Young family or are just getting started, here are 11 ways to manage multiple college tuition bills.
11 tips to afford college
1. Utilize 529 plans. Looking for a place to stash your college savings for your children? A state-sponsored 529 college savings plan is a useful resource.
“In many cases, it’s the best tool to save for college,” says Ryan Derousseau, a certified financial planner at United Financial Planning Group in New York. “The money grows tax-free if you use it for qualified educational expenses.
“And,” he adds, “with new laws in place, if your kid decides against college or gets scholarships, a portion of the 529 funds can shift to a Roth (retirement-savings account) for your kid or you can move the 529 to another family member who does want to go to college.”
Learn more: The pros and cons of 529 savings plans, prepaid plans and how to decide
2. Start early. If you have many years before your children will be college students, make beneficial use of this time and start saving early.
When to start? As soon as you can
“Beginning a process of regularly contributing to your kids’ education, through a 529 plan for example, is ideal when they are born. This allows investments to grow over time,” says Ryan Johnson, founder and financial planner at Hundred Financial Planning, which is set to launch in Grand Rapids, Michigan, in early 2024.
But not all families will be able to start this early.
“This is not always a reality for some families, as they have less disposable income when (children) are younger,” Johnson says. The natural starting point is…as soon as you’re able.
Turning a wage increase into an opportunity to save, as opposed to increasing your lifestyle, is a great strategy, he adds.
3. Get the family involved in paying for college. Grandparents, aunts, uncles and cousins and family friends may all wish to contribute to your children’s college educations. Ask them and allow them to participate.
“Have open conversations with grandparents and others who are willing to help early in your child’s life,” says Vida Jatulis, a Certified Financial Planner with MainStreet Financial Planning in Westlake Village, California.
Learn more: Why grandparents should set up 529 college savings plans
Manage your kids’ expectations
4. Be realistic about how much you are able to pay. College is expensive and paying all four years of tuition for two or three children may not be feasible. Be honest and upfront with your children about this possibility.
“I have a client couple that has three kids in college. They were very clear with their kids that they would pay for the first year of state tuition. After that, the kids will have to fund their college through loans or work,” Derousseau says. “The kids have clear expectations while the parents are living up to a promise that they can financially keep. It’s not going to pay the full tuition, but it will go a long way to reducing the kids’ college costs.”
5. Be smart with your college savings budget. Money can be incredibly tight when you have two or three students in college. Keep a close watch on your budget.
“When you have multiple kids in college at once, there will be years when college costs overlap and expenses are really high. These lumpy expenses can wreak havoc on a budget!” Jatulis says. “Create a college funding strategy that will consider this and strive to even out demands on your budget. For example, it may make sense to use your cash flow when you have one in college, and delay use of grandparent funds/529 Plans until years when you have multiple kids in college.”
Consider alternatives for a year or two
6. Go to low-cost community college for two years. Rather than attend pricey four-year colleges, opt for less-expensive community colleges for the first two years of your children’s college educations. Doing so will help to slash tuition costs.
“Since the first couple of years of college are focused on completing general education course requirements, it can save a tremendous amount of money to start at a community college and then transfer to the college of choice,” Jatulis says.
7. Think about state colleges. Another way to reduce multiple, hefty college tuition bills is to attend lower-cost state colleges and universities.
“Expecting to save for three kids going to Ivy league schools is expecting a lot. Instead, try to save enough to afford state schools,” Derousseau says. “If your child prefers a private school, then you have some funds to help while they can use other resources to pay for the difference. It will give them ownership over their college decision as well.”
8. Add in travel expenses. If your children are interested in out-of-state colleges, be aware that your 529 college savings plan cannot be used for travel expenses to and from college.
“Travel is not an eligible 529 Plan expense, so if your kids are going to go out- of- state to school, this is an expense that you will have to cover with cash flow or other savings,” Jatulis says.
9. Apply for grants and scholarships. A great way to lower college tuition costs is for your children to be awarded grants and scholarships.
“Encourage your kids to research grants/scholarships. There are many programs out there. Most folks don’t take the time to look into the vast opportunities for funding,” says Brandon Gregg, a Certified Financial Planner at BBK Wealth Management in Lafayette, Indiana.
Plus: Desperate parents will pay top dollar to lower the price of college
Have your children contribute
10. Ask your children to help save for college. Involve your children in saving for their college educations. A part-time or summer job while still in high school is a good place to start. Similar opportunities may be available when they start college.
“Encourage your kids to save. This could be a terrific opportunity for kids to learn the value of saving and the value of working,” Gregg says.
11. Look for ways to get college credits early. Ohio high-school students, for example, can earn high school and college credits simultaneously through the state’s College Credit Plus program. It lets them enroll in both community college and university courses — and it’s free if you attend a public college or university in Ohio.
Get a head start on earning credits
“For us, this was a real game-changer,” Young says. Through the program, one of his sons earned 65 college credit hours by the time he graduated from high school. “He had half of his college already paid for,” he adds.
The Young family will have the financial challenge of multiple college tuitions for quite some time. To get through it, Young reminds himself of two things:
“Save and pray.”
Lucy Lazarony is a freelance journalist living in South Florida who writes about personal finances, the arts and nonprofits. Her writing Is featured on Next Avenue, Bankrate, MoneyRates.com, MSN and the National Endowment for Financial Education. She previously worked as a staff writer at Bankrate.
This article is reprinted by permission from NextAvenue.org, ©2024 Twin Cities Public Television, Inc. All rights reserved.
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Dear Quentin,
Per our parents’ will, my brother and I will split their inheritance 50/50. This includes the family house. I would like to keep the house in the family for my children, as I bought my current home nearby to be able to care for my parents as they aged.
I understand the best time to sell a home is soon after inheriting it, to avoid capital-gains tax. The issue is that my brother is single and currently living in the house, and he may not want to sell his portion right away. I would be happy to let him live in the house that we jointly own.
I worry that he may decide to sell his half and I’ll have to take a financial hit, or that he’ll get married and live in the home with his family, which may complicate matters. How do I ensure my interests in the home are protected while making sure I do right by my brother?
Thank you so much.
Complicated Matters
“If due to financial or familial reasons you did flip a coin, agree that the end result is the right result, whether either of you likes it or not: Heads you win. Tails you win.”
MarketWatch illustration
Dear Complicated,
Your last question is both a good one and rhetorical. Your interests are already protected: You are entitled to 50% of this home, not 100%, as you rightly suggest. Inheriting a property with a single sibling who does not have children does not automatically entitle the sibling with children to full ownership, and/or obligate that sibling to sell their share to you. Real-estate inheritances can cause discord among siblings. Not everyone understands this, as you apparently do.
You can do right by your brother by asking him what he wants, too. This appears to be the only home he has known, and one could argue that he has an equal — or even 50.1% — right to buy you out, given that you live elsewhere with your family. If he wishes to continue living there, it would be generous and compassionate of you to allow him to do so. Many siblings would insist on cashing out and filing a quitclaim to turf their sibling out of the family home.
You’re correct in that the house will be passed down to you through a “step-up in basis” valued at the current value, not the purchase price, which reduces your capital gains tax if/when you sell. If the house was sold for $1 million, even though it was originally purchased for $500,000, you and your brother would have to pay capital gains tax on $500,000, if you decided to sell, you would pay long-term capital gains on the appreciation post-inheritance.
Rite-of-passage scenario
There is, however, no definitive right or wrong path on your familial dilemma, except that you both navigate the process with transparency and respect. If he has lived in the house his entire life, and gets married and has kids, it seems reasonable to maintain the status quo — that is, he continues to live there — but with one proviso: He buys you out. You could ask him to do that anyway, but if he can’t afford to, he is relying on your generosity.
In the grand scheme of things, this is a normal rite-of-passage sibling scenario. I have received letters from people whose siblings “borrow” hundreds of thousands of dollars from their parents with no intention of ever repaying them; siblings who hid their father’s will; and parents who were possibly coerced into putting their son’s name on the family home, much to the surprise and consternation of the other family members. The list goes on.
What now? Scenario No. 1: He lives there as a single man, and you don’t ask him to buy you out. That’s pretty decent of you, all things considered — though you are entitled to change your mind, buy him out or ask him to downsize. Scenario No. 2: He starts a family and lives there, and you ask him to buy you out. If he does not have the money, you either sell or you buy him out. That’s fair. Scenario No. 3: You both have families, and the money to buy each other out. You flip a coin.
Oftentimes, leaving our egos and fears and wants aside is the better option. Trying to make a case why we deserve something more than the next person — a bad case of the old “do-re-mi-me-me-me-me” — can lead to more resentment and one-upmanship. It’s not likely to end well. If due to financial or familial reasons you did flip a coin, agree that the end result is the right result, whether either of you likes it or not: Heads you win. Tails you win.
This house should never be more important than your relationship.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
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Previous columns by Quentin Fottrell:
My parents want to pay off my $200,000 mortgage, and move into my rental. They say I’ll owe my sister $100,000. Is this fair?
‘I hate the 9-to-5 grind’: I want more time with my newborn son. Should I give up my job and dip into my six-figure trust fund?
Joseph Bankman and Barbara Fried, the parents of Sam Bankman-Fried, have asked a court to dismiss a lawsuit by the bankrupt cryptocurrency exchange FTX seeking to recover funds it alleges were fraudulently transferred.
FTX sought to “recover millions of dollars” from Bankman and Fried in September 2023. Less than two months later, their son, Bankman-Fried, was found guilty on all seven charges of defrauding customers and the United States. His sentencing is expected in March.
Bankman and Fried, both professors at Stanford Law School, argued that Bankman did not have a fiduciary relationship with FTX and did not serve “as a director, officer, or manager,” and even if a fiduciary relationship existed with FTX to plausibly allege a breach, according to a Jan. 15 court filing.
Significantly, the court filing argued that it is not enough for FTX to plead that the parents “knew or should have known.” Instead, the filing argued that FTX should have produced specific facts showing “actual knowledge” that the parents “knew certain actions would result in a breach of fiduciary duty.”
In the September 2023 lawsuit filing, FTX did not state the total amount Bankman and Fried may have misappropriated, but it did provide certain line items: Bankman received an annual salary of $200,000 for his role as a senior adviser to the FTX foundation, more than $18 million for the property in the Bahamas and $5.5 million in FTX Group donations to Stanford University, which the university has said will be returned.