What is the best approach to save money for College for three kids?
I'm not a 'rule of thumb' guy, but here, I'd suggest that if you can set aside 10% of your income each year for college, that would be great. That turns out to be $900/mo.  In 15 years, if you saw an 8% CAGR, you'd have $311K which happens to be in your range of expenses. And you'd still have time to go as the baby won't graduate for 22(?) years. (Yup, 10% is a good rule of thumb for your income and 3 kids) Now, on the other hand, I'd research what grants you'd be able to get if you came up short. If instead of saving a dime, you funded your own retirement and the spouse's IRA if she's not working, and time the mortgage to pay it off in 15 years from now, the lack of liquid funds actually runs in your favor. But, I'm not an expect on this, just second guessing my own fully funded college account for my daughter. In your situation you will be using your normal savings to offset additional funding from student loans or similar financing. Also, sending your children to or moving to a jurisdiction that has lower education costs but ample opportunity should also be in your cards. That can be another state, or another country. Live where you live now untill your kids are about to go to college. Then move to Germany and send your children to college for FREE. The german universities may be not in the top 10 of the world (THE), but are still competitive enough on a worldwide scale. Also, if your children excell at college, it should not be a huge problem to transfer them to the top universities in the UK or US (with scholarships from Germany). In addition, your children can go on a exchange to other universities for a couple of months or multiple years, fully funded by the European Union or the german universities.
"I wrote Retirement Savings Ratio some time ago and 15% seemed the sweet spot. The 15% is 10% saved and 5% match, in my mind. The reason I link is to show a spreadsheet that shares my approach to the analysis.  You list a huge number of things to think about, all great. I'm near Duff's view although I shoot for 20X final  income so 4% of that is an 80% replacement. There's nothing magic about 80. If social security exists, it actually drops the required 80 from you to the 60 or so Duff lists, so we align.  The 'problems' with my sheet - no one gets exact 3% raises for 43 years, so one can go in and change that, maybe higher early on, then slow it down. Returns are 8% every year, so one must go to the sheet or their own plan and reassess how they are doing each year. Disclosure - we are now at 14X our income with a goal of 25 to replace 100%. So we need a cumulative 80% growth (as in S&P at 2500) or the years of deposits to get there. I am nearing 50.  Let me pick one of your questions - ""Your expenses go down at retirement, stay the same, or go up?"" - this is the $64K question. the 80% is an average guess. The general assumption is in this range. If we downsized right after the kid goes to college, we could retire on far less. So, to wrap up, online calculators and spreadsheets only go so far. Your questions are dead on. A planner should ask every one of these questions before assuming any ratio.  Edit - on re-read I am blown away by the list of questions you have here. It's great. And it shows how there's risk no matter what." I like many of the answers, but here is a summary of reasons: Almost everyone will retire, and it is almost certain that government or company pensions schemes will not alone give you a lifestyle you would like in retirement. Money invested early is worth much more in retirement than money invested late, thanks to the miracle of compound interest. In some countries there are tax advantages to investing a little bit of money every year, compared with nothing for a few years and then a lump sum later. Much investment advice is given by investment consultants, who profit when you make investments. It's always in their interests to have you invest as early and as often as possible (that doesn't invalidate the first three reasons). Having said that, it isn't always in your best interests to invest in retirement funds very heavily at the start of your career. You might want to consider paying off any debts, or saving for a house, or even having a bit of fun while you are young enough to enjoy it. That back-packing trip to Nepal is going to be a lot easier when you are 23 than when you are 40 with kids. "In your comment, you said: It just seems a little stupid to me to go and put away money for the explicit purpose of emergencies (presumably in a way that's somehow different from how you would normally save money). Seems better to go and treat the money as you would normally, and then pull whatever you need from the money that you had saved. The problem with that logic is that people save money for many different things.  You might save for a vacation, or a new refrigerator, or a new car, or a house, or your kids' college education.  If you ""pull whatever you need"" for such expenses, you may find that when a real emergency occurs, you don't have enough money.  The things you used it for may have been legitimate, reasonable expenses, but nonetheless you may later wish you had deferred those expenses until after you had built up a cushion. So the idea of an emergency fund is to designate certain money that is not to be used for ""whatever you need"", but specifically for unforeseen circumstances.  Of course there can be debate about what counts as an emergency, but the main point is to distinguish saving for planned future expenses from saving for unplanned future expenses. Note that this doesn't mean the money has to be in a separate account, or saved in any special ""way"".  It just means the money has to be considered by you as an emergency fund.  For some people, it may be psychologically useful to put the emergency fund in a separate account that they never withdraw from.  But even if you just have all your money in one savings account and you mentally tell yourself, ""I don't want to ever let the balance drop below $10,000, just so I have a safety cushion"" then you are effectively designating that $10,000 as an emergency fund." "John's answer is similar to what I was thinking. You should invest in insurance ""because there's an insurance salesman who needs to pay to send his kid to college."" I will never be a fan of any type of permanent insurance, and I think it wrong to sell a single person with no dependents such a policy. I've used the expression ""Variable Annuities are sold, not bought."" I feel the same about these insurance policies.  The best advice I can offer in a short reply is this: If you need life insurance, buy term. Save as much as you can, 10% minimum, more if you are able. A young person should be saving for retirement and to position them self to buy their first house, if that's what they wish. What good is a full up Whole Life policy when you need to raise $40K to put down on a house? Sorry to sound like I'm lecturing, this is one of my hot points." The value of money is not only in the earning and saving of it but also in the discipline in spending it.  Any approach to teaching children about money must ensure a balance between the two otherwise they will either become fearful of spending (and so never actually learn that money is but a tool and can be enjoyed) or irresponsible (spending with abandon with all that concomitant misery): Teaching kids about money is a wonderful opportunity to instil discipline and values.  Any strategy must be structured to suite the child's age and abilities as well.  Trying to teach compound interest to too young a child will just become needlessly confusing and worrying for them.  Hope this gives a few ideas. "My basic rule I tell everyone who will listen is to always live like you're a college student - if you could make it on $20k a year, when you get your first ""real"" job at $40k (eg), put all the rest into savings to start (401(k), IRA, etc). Gradually increase your lifestyle expenses after you hit major savings goals (3+ month emergency fund, house down payment, etc). Any time you get a raise, start by socking it all into your employer's 401(k) or similar. And repeat the above advice." "There are two solutions. One is financially better, the other is psychologically better.  Financially better: You should pay off loans in the order of interest rate, so the 9% first, then the six percent, then the 3-4%. If you pay back $1000, the first one saves you $90 a year in interest, the second saves you $60, the third $30-$40 a year. Every year until everything is paid back.  Psychologically better: Some people have psychological problems paying back debt, and it is better for them to pay back small loans first. If you feel better having two loans instead of three, and feeling better makes you able to save money and pay back the other loans, while having three loans would make you depressed and unable to make savings - pay back the smaller loan.  If you don't have that kind of problem, use the ""financially better"" method." There are two types of 529 programs.  One where you put money aside each month. The one offered by your state may give you a tax break on you deposits. You can pick the one from any state, if you like their options better. During the next 18 years the focus the investment changes from risky to less risky to no risk. This happens automatically. The money can be used for tuition, room, board, books, fees. The 2nd type of 529 is also offered by a state but it is geared for a big lump sum payment when the child is young. This will cover full tuition and fees (not room and board, or books) at a state school. The deal is not as great if they child wants to go out of state, or you move, or they want to go to a private school. You don't lose everything, but you will have to make up the shortfall at the last minute. There are provisions for scholarship money. If you kid goes to West Point you haven't wasted the money in the 529. The money in either plan is ignored while calculating financial aid. Other options such as the Coverdell Education Savings account also exist. But they don't have the options and state tax breaks. Accounts in the child's name can impact the amount of financial aid offered, plus they could decide to spend the money on a car. The automatic investment shift for most of the state 529 plans does cover your question of how much risk to take. There are also ways to transfer the money to other siblings if one decides not to go to college. Keep in mind that the funds don't have to be spent as soon as they turn 18, they can wait a few years before enrolling in college.