Funding My Daughter’s College

Expert Parent Disclaimer

Being a parent has taught me that predicting the future is a fool’s errand. Yet here we are, expected to model college expenses for 2036, while I don’t even know how much summer camps will run me this summer.

I’m also working with a sample size of one, so consider anything involving kids older than 7.8 to be pure conjecture.

Still, I wanted to share my personal approach to children and finances. If for nothing else, perhaps you can take comfort in my lack of confidence.

Fitting Kids into Your FIRE Plans

My pre-FAANGFIRE FIRE plans involved making lots of money in a HCOL area where the overall compensation would allow me to accelerate my savings towards my “enough” before moving to a lower cost of living area. Pretty basic spend less than you earn type stuff.

Kids changed everything. The idea of moving to a lower cost of living area just so I didn’t need to work suddenly felt selfish. I could no longer optimize my FIRE plans without taking into consideration how they would impact my daughter’s future.

That realization is how I formulated my original FIRE mission statement, where I made clear that achieving FIRE shouldn’t come at the expense of my daughter’s future opportunities.

“I want to achieve my goals while also ensuring that I also set up my daughter to have a future where she is able to contemplate ridiculous things like early retirement”

This also leaves me with the lingering question of how do I even define something so fluffy as “setting up my daughter to have a future where she contemplates ridiculous things like early retirement?”

I still don’t know. When asked, I often say, in jest, that it involves living somewhere that values strong public schools while also lowering the probability of my daughter ever setting foot into a lifted pickup truck (sorry Texas).

Perhaps reality isn’t too far…

Much of that is shaped by an often conflicting reflection on my own life. My internal monologue of “I went to public schools in Texas and I turned out all right” vs “I should be using every resource available to give my daughter a leg up in this world”.

Then there is the example I am setting. She will likely only remember me in this post-semi-FIRE state. I love that this allows me to provide a living counter to the gender norms she will be exposed to throughout her life. Seeing her mom as the financial powerhouse forces a normalization of that view. I just have to hope the benefits of that example outweigh all the other unknown ways this arrangement could mess up her future.

I am not alone. I have heard firsthand from many other families who share this same internal conflict. It is the balance of using your financial resources to ensure the odds are stacked in their favor, while also recognizing that your own success was perhaps amplified by a certain amount of struggle.

The Hedge of Uncertainty

I don’t even know what the future of college looks like. This shapes how I approach it from a financial perspective. This uncertainty forces a strategy that values optionality. I definitely don’t want to commit 100% of my daughter’s future college savings into a rigid savings account that might only allow paying for educational expenses (a la 529).

I also only have one child. Perhaps if I had multiple, this conundrum would be less of an issue. Thanks to the beauty of being able to change the beneficiary of a 529 at any time, when you have multiple kids you are more easily able to spread things around if perhaps one child doesn’t end up needing the funds or skips college altogether while the other decides they want to go to private school.

With flexibility in mind I’m aiming to cover just half of the projected costs (a target of $400k in 2036) in a 529, with the rest in a flexible taxable brokerage. I’m also thinking about the decades that follow. Researching UTMAs, the new Trump Accounts (launching in July that were part of OBBB), and other financial accounts. My goal is to maximize impact: I want to help her in her 20s or 30s, not dump a portfolio on her when she is 60 and I die at the ripe old age of 91.

Current Status

This uncertainty prevented me from doing what likely would have been the more optimal financial move. That would have entailed superfunding a 529 with up to 5 years of contributions in the year my daughter was born. That likely would have been a good “one and done” move to take care of college expenses. I didn’t though. I also am even less certain now of college expenses than I was 7 years ago. I didn’t do nothing though. I have intermittently added to a California 529 via scholarshare. The account currently sits at around $90k. If I was able to earn ~8%, the current $90k should naturally grow to reach my $200k target of 50% coverage. Banking on a linear 8% over the next 10 years leans optimistic. If I assume 5%, that would see my current $90k growing to $150k, a $50k shortfall. Doing a little math gets me to needing an additional $33k invested today to hit my 529 goal.

Be right back…

Ok, I now need ~$14k more in the 529 and I should be set.

What about the other half? The half I plan to fund out of a normal brokerage account. As of right now I plan to treat it like any other expense. I am likely to create a new brokerage account that is called “College” even though it will still be in my name. Just to give it some visual and accounting distinction to convey its real intent. This earmarks it without any of the commitment or restrictions.

More To Come

This year I want to write more about FIRE and kids. It’s been top of mind for me and for a lot of you. I want to give my daughter a real tailwind, but I don’t want that tailwind to turn into a headwind later. I can tell my instincts are shaped by how volatile money felt when I was younger. The goal is stability. I just don’t want to overcorrect and turn money into the main character in her life, or in mine.

How are you currently approaching this? For those who are ahead of me, how does my plan sound? Anything you would change?

-Andre