(This is part II of a series of posts about Joe’s mission to find the perfect colleges for his daughters. Check out his first post to catch up.)
My girls were born in the “dark ages” of college planning. Born prior to the introduction of 529 plans in 1996 and before the expansion of Coverdell Education Savings Accounts in 1997, our savings strategies took on very traditional, paternalistic tones.
Back in the “old days” (now I do sound like my parents!), strategies of the day revolved around UGMA/UTMA accounts, Series EE Savings Bonds and saving money in a parent’s name. Nowadays, it’s often standard practice to meet soaring college costs with 529 Plans and Coverdells.
I confess that like many dads out there, my greatest fear was that if I saved in my kids names (such as through an UGMA), that at age 18, my daughter would say “Thanks for the $$$ dad – I’m joining a biker gang!” Wanting a little more control over the funds, we chose to set up a mutual fund account in our names.
We deposited some of those initial congratulations checks we received along with taking advantage of dollar cost averaging and putting money into the account – even just a small amount – each month.
I’m a big believer in the importance of disciplined saving – putting money to work each month regardless of market conditions or personal economic storms (Honey, we need new brakes for the van!). Making investing easy makes it easy to be disciplined, too. Many financial services providers – such as banks or mutual fund firms – make it easy to put money away each month by “sweeping” funds from your banking account. When the girls were little, we added $150 a month to the account. It came out automatically the first of the month (pay yourself first!) so we didn’t have “more month than money.”
Saving for a Rainy Day
We sat back in those early years through the late 1990s and watched the account grow. We had crunched the numbers and it would certainly cover the cost of an in-state public university. Even as the tech bubble of the period was in full swing and the account was growing well, I had some comfort because there was another source of college funds tucked away, too.
Benjamin Franklin had a saying “For age and want, save when you may; No morning sun lasts the whole day.” From the day I started working after college in January 1987, through the mid 1990s, I’d been saving for a “rainy day” by purchasing Series EE Savings Bonds through payroll deduction (another way to save effortlessly!). Each paycheck, I put $50 into a crisp $100 Series EE Savings Bond. Periodically, I took them to the bank safety deposit box to keep them neatly tucked away.
Together, with the funds we’d been accumulating in a growth-oriented mutual fund, we thought we’d be ok. As we entered the new millennium in January of 2000, the Dow soared past the 11,700 mark and the tech-heavy NASDAQ Composite peaked at more than 5,000.
We’d crunched the numbers. Things were looking good. Our dreams were assured. It was a New Age. Until March of 2000, when the bottom fell out.
More on how my family struggled to bounce back in the next post…
