Thank You, Sir, May I Have Another?


by Jeff C. Johnson

College graduates in mortarboard caps

If you watch old cult comedy movies, you know this line from a scene caricaturing a fraternity initiation ceremony. The candidate is getting “spanked” by the pledge master of the initiation rites, and each time he is struck, he calls out, “Thank you, sir, may I have another!”

My friend “Tommy” recently called me and blasted this line into my ear before I could even say hello, following it with, “I just wrote the check for fall freshman tuition. OUCH! I knew it was going to cost this much, but it still stings! Is anyone really ready for this?”

If you went to college in the ’60s or ’70s, or even the ’80s, you might still have some sticker shock about today’s cost of college tuition, especially at a top private college like Tommy’s daughter is attending. Costs approaching $100,000 per year, while not common yet, are possible.

Personally, I lucked out. My kids went to local State U, a bargain. I also had some personal investments and savings and old-fashioned custodial accounts with some money set aside for tuition. They finished their college days, and neither I nor they had whopping secondary education loans.

But that was then, and this is now.

One tax-efficient way to start that college accumulation fund is with a tax-advantaged account called a 529 College Savings Plan, where monthly contributions can be invested, dividends and gains are deferred from tax, and, if the money is used for bona fide college expenses, the gain portion is exempted from taxation. The rules are different depending on the state in which you live, but in my home state of Nebraska, a portion of the contribution could be deductible for state income tax purposes (but not a federal income tax deduction).

The Uniform Gifts to Minors Act (UGMA) allows anyone to save for a minor child while still controlling and investing the money. Though not sheltered from taxation, it can be used for college, a car, a home down payment, and getting set up in life. When the child reaches the legal age of majority, it becomes theirs, and the “custodian” relinquishes control.

This short column is not intended to be a complete discussion of every material fact related to education planning and college savings vehicles. Advice from a qualified financial professional, a CPA, or other college-planning expert is recommended.

The point is this: (1) start saving monthly for that child or grandchild shortly after their arrival on the planet, and (2) get ready to be shocked when that first-semester tuition is due.

If you’ve finished this short story, you probably know someone that could benefit from reading it as well. You certainly are invited to forward it on.

More about Tommy and the college conversation in my next post.