I feel like I’m a fairly responsible person when it comes to personal finance. Our bills are paid on time, our emergency fund is established and we don’t have debt except for our mortgage. However, there’s one area where I feel like a financial failure: saving for Haiden and Piper’s higher education.
It’s not that my husband and I have ignored saving money for them. We set aside amounts here and there. It’s just that I don’t know how to start a college savings plan that’s both effective and easy-to-manage. Between traditional savings accounts, 529 plans, savings bonds and everything else, I could really use some help!
Are you saving for your child’s educational future? Do you have any tips for me? Do you have questions of your own? Let’s talk! Please leave your thoughts in the comments below.
We have 529 plans for our children. We have automatic depost for them. We also have savings accounts for each one too. Start early and do it automatic so you do not think about it!
Don’t know if this this the best way, but we just started a savings account and put $300 a month in our two kids account. Once we get to $20,000 we will move it to a CD. This account is for college, but also for other expenses too in the future…..like a car, wedding, braces (?), etc. My 5 year old almost has $20,000 already.
My kids are still in daycare/preschool. I figure once they get to public school I can put a portion of the money I’m saving from not paying for that into a savings plan for them.
My one sticking point is I hear some 529s are “better” than others (depending on the state offering it and the state you live in). I am daunted by the task of picking one and feel like a savings acct might provide more liquidity.
I am working on this right now for my kids. 529s sound complicated but once I sat down And read more about it, it wasn’t so bad! I will post about it on my blog soon I hope.
The short version: go with a 529 or Coverdale. Bonds and plain savings accounts are not the best places for college savages because of growth potential and tax advantages.
Marybeth Hamilton says
CJ, I think that I’m stuck in the same place you are! I wish I knew how to compare 529 plans, but the only way I’m going to figure it out is to start researching 🙂
I’m looking forward to reading your post when you get it up. I imagine you’re pretty busy right now 🙂
We started up 529 plans for the girls and I actually just did a post on it on my blog . We’re actually going to talk to our relatives by making contributions to that instead of savings bonds in the future as the interest rate on savings bonds is such now that they will take 20 years to mature. Another advantage to 529 plans for us – we can take up to $6,000 in deductions on our state taxes in the state we live in. Hope this helps!
I got a 529 plan when my son was 6 months old…he’s now 15 months. It took me months to research information on the internet. ..finally did it and narrowed down to a plan. I have a whole document complied with all kinds of information that I found online on different 529s. Feel free to drop me an email ([email protected]) if you wish to look at the document..I’d be more than happy to share! 🙂
erin, maker of chimes says
One thing to keep in mind is that the 529 plans HAVE to be used for education. If the child decides that they do not want to go to college, do not use all of the money you’ve saved for them in the 529 account, or something happens to them and they do not have a need for higher education you’d have to give it to the other child or possibly switch to someone else for their schooling. That’s just something to keep in mind too!
Something else to help you out. You can compare different (vanguard) plans here:
You’re free to choose a sponsoring fund company from whoever you want but keep in mind that your state might have it’s own sponsored 529 plan. For instance, one of the Oregon 529 plans is through Oppenheimer, so Oregon residents will get tax breaks for using the state plan versus a plan through PIMCO or American Funds. Some states don’t have a state plan so it’s not an issue. As far as investing, it really all depends on your level of risk tolerance. You can always invest in an age based fund that changes its investment objective depending on how far out from college the beneficiary is. A 2-year old can stand more risk because they are 16 years away from college compared to a 17-year old who is going to need the funds right away, therefore the funds are invested accordingly and often change automatically as the child grows. No matter what you do, it’s never to early to start saving.
In my opinion, nothing beats the advice of a trusted financial adviser if you have questions. And I do mean someone you TRUST, because then you’re not worrying that they’re trying to put you into a product that’s meant to line their pockets more than yours. Ha! Can you tell I work for a Financial Planning/Wealth Management Firm?