Parents on FIRE - Planning for our Children's Future 529 IRA

Mr. AF and I have been having a discussion on and off for a few years now about how we want to financially support our children in their lives.  We started by putting a few thousand dollars into our daughter Peanut's 529, and a few hundred into a University of Alaska 529 (in case she wants to go there, or take summer classes with them).  Looking at my handy-dandy compound interest calculator with an assumed rate of return of 5%, that gives her $13,000 at age 18 to spend specifically on school.  Not very much, right?

Part of what has been stopping us from adding more to these accounts are our many questions around what college will look like in 15 years.  Will it be close to free for students by then, as it is in many other first world countries?  Or cheaper than the mortgage-level cost it has today?

To make this question more complex, many schools in the Anchorage School District are foreign language immersion.  The one closest to our house is French language immersion, the next closest is German language.  This would open doors for our daughters to study internationally.  Our personal preference at this time would be Germany if one of them makes that choice because of the direct flights offered from Anchorage to Frankfurt on Condor Airlines (an Alaska partner).  Studying in Germany requires proof of less than $20,000 in savings, which is not too far off from our current 529 savings.  Studying in France looks a little more expensive due to cost of living (approximately $40,000 US for 4 years),  Belgium even more expensive at a ballpark of $50,000 for four years.  However, these are all a deal when compared to the $100,000 or more price tag offered by many universities in the US!

International universities would also cost more to travel to (unless Mr. AF and I decide to move to Spain or Portugal to be more accessible to them!), so that is a consideration.  I am not as worried about that because we have a miles savings plan dialed in with Alaska Airline's Club 49, a pretty sweet deal for those of us who reside in the great AK.  In addition to that, we have a healthy travel stipend built into our FI budget of $500/month along with $400/month for Miscellany.

Our child savings discussions have ranged past college savings. Many future projections predict an increase in AI and reduction in human jobs (check Ed Hess' book Humility is the New Smart, for example).  This represents a financial risk for our little ones beyond what has been historically imposed by the vicissitudes of life.  Our approach to reducing this risk without creating trust fund monsters is to set a goal of funding both of our daughters' Roth IRAs to an amount that will significantly cover their retirement.  If we can fund their Roth IRAs to $72,000 by the time they are each 12 years old, at a 5% interest rate they would each have over a million dollars at age 67.

Mr. AF owns his own digital marketing business, so by paying them for the use of their image in his own advertising he is able to legally pay them for their work.  We then take their earned wages and put the money into a Roth IRA as a hedge against downside future risk for them.

We have also talked about purchasing a condo or flat near whatever university they choose to attend, giving each daughter a 50% stake and the experience of acting as a property manager by renting rooms to her fellow students.  There are many factors that come into play for this plan to come to fruition, of course.  But we agree that out of the many ways we have seen friends' parents help their offspring learn fiscal responsibility during our own younger years this was the most effective.

If you are a parent, what plans and hacks have you found for planning for your children?


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