I turn to my vast and knowledgeable ...uh.... you guys.
My lady's kid is 7 and I want to start up some sort of College Savings for him so that by the time college comes around a good chunk of it can at least be paid for.
Does anyone out there know of any good plans out there for this type of investment?
Should I just open a 2nd savings account and stock pile the money in there until college comes around?
I figure a few of you out there had a few happy accidents whom you believe will one day head off to college to better their education and take care of you while you enjoy playing poker in your retirements and whatnot so that I could get some sort of advice.
Thanks a bunch
your friendly neighborhood grrouchieman
Without ever using them myself, a 529 college savings account is worth a little bit of research, I think. But in the end the money has to be used for college-related expenses or else you end up with a penalty. Ask the kid if he's ready to sign a letter of intent to attend college. Give him the hard sell if he isn't.
ReplyDeletehttp://www.usnews.com/education/best-colleges/paying-for-college/savings/articles/2010/12/08/roth-ira-vs-529-choosing-the-best-way-to-save-for-college-and-retirement
Why are you asking us and not Google or the better choice -- duckduckgo.com?
ReplyDeleteYou been sneaking out and taking Yoga classes behind our back, haven't you?
Otherwise, you wouldn't be so flexible in getting wrapped around here little finger.
Because I was using this as a reminder to do research on my day off.
DeleteI don't Google before 10 am.
:)
Try http://www.mefa.org/saveforcollege/saveforcollege.aspx?id=1326.. the U-Plan. Tax deductible I think. 529 Plan is good too. http://www.savingforcollege.com/intro_to_529s/what-is-a-529-plan.php. Not sure of any others. The only bad thing about just dumping money in a savings account is you avoid the tax benefit of a college savings plan... so you get taxed on the money every year it is in savings as income instead of being able to pay less taxes on what you earn by deducting the deposits or something like that...
ReplyDeleteThe 529 sounds a lot like the RESP that we have here in Canada. Here, any income earned on the deposits is not considered part of your income. I have mine set up in some low risk mutual funds, and the best part is the government provides grants matching 30% of your contributions up to a certain amount. My kids have more money socked away then me at this point :0.
ReplyDeleteI echo the advice above regarding a 529 plan. Dumping money in a money market or savings account sounds like an awful idea. Given the time frame (10 years or so), you'd want to be growing that money
ReplyDeletegrrouchie, sounds like you are getting ahead of yourself. Get married first then you and your wife can do whats best for the little fellow.
ReplyDeleteI wouldn't do the 529 plan unless you really want this child to go to college on that money, even if something were to happen between you and your lady. I suspect that you do, or you wouldn't be looking at starting a savings for them in the first place. The 529 or U-Plan would be good to grow the money for that specific use.
ReplyDeleteI have my kids college savings in ING. It was good when I was getting 3% interest but now is under 1%. The CD's are about the same. It's time for me to start looking for a better option too. I may look closer at a 529 plan or U-Plan.
I have always liked having it in savings so I can determine what it will be used for. We may need to help the kid with a car for college, food or housing, and have them pick up loans to pay for their schooling. I wouldn't be able to do that if I have all that money tied up specifically for college. Student loans are relatively low interest and my kids will probably have to get them to go to school anyway. I just want to have money to help out if they decide to go to college. If they don't, I will have a nice boat, truck and camper for my nesting stage in life.
I had help when I went to college from my parents with dorm costs and some can I borrow money situations. I had to pay for my schooling the hard way. It made me appreciate the schooling I recieved.
You had some good suggestions on here.
If you are not already contributing the maximum to your 401(K)you should do that. You can borrow money against it for college and repay yourself the interest. There are limitations on how long you can take to repay it so that should just be one option. Next up is a traditional IRA or a Roth. There is no penalty for early withdrawal if used for college. Those are probably the options with the most flexibility both in investment choices and distribution and minimize your taxes currently. Next would be the 529s. Beware 529 and U plans that are tied to a specific school or State that require the student to attend that school or a school in that State.
ReplyDeleteFirst off, I have to say that I agree with Zin.
ReplyDeleteBut....anyway.....
A friend of mine already paid for his son's education with "yesterday's rates" rather than the exorbitant cost it is these days. He bought it back when his son was still a toddler about 10 years ago. I'm not sure how he did it, but maybe talk to the bank or maybe even a bursar's of a university.
I agree with Zin too - all in good time though.
Delete:)