College Savings.....529??

[WDWorBUST]

Okay - we have all been discussing how much we are wanting to save for our child/children's college. I do have a question hopefully someone on here can answer for me. My DH went to set up his IRA a couple of years ago and the financial consultant and he were talking about college education programs. He said that whichever one they were talking about (I believe it was the 529 plan) was put in the child's name and if they chose NOT to go to college then they would receive that money to do whatever they wanted to with it. Now I am definitely in the "help all you can" camp when it comes to my DD and possibly future children going to college - but I'm not going to save up all this money for an education and her decide she doesn't want one and blows all my hard work. But I am interested in learning more about the college savings programs. Right now I do what someone on here suggested. I have had an ING account for her since a couple of months after she was born that for now I have been depositing $10 a week in and any Christmas/just because money in. I am getting ready to do a CD through ING with it to up the interest a little. But are there better things I could be doing??

 

[worlddreamer]

It is good to hear that you are planning in advance for a very expensive endeavor! I am graduating from college tomorrow, so let me offer a little advice from the prespective of a college student..

First, the best advice I can give to any parent or child is to invest more time into your education than anything... there are several loans and scholarships out there that will help you pay for school. I started recieving scholarships in grade school for things such as perfect attendance and high marks. Once I started seriously considering college 3 different schools offered to pay my full tuition as long as I remained on the Deans List throughout my college career - a direct result of my great grades in high school and good test scores.

Secondly, although I don't know much about the finanicial stuff, I can tell you that the more money you make, and the more money you have tucked away in accounts for your children the less the government is willing to "loan" you to go to school. For example, my mother stashed away money for me, and in return, it was determined that we could afford to pay more "out of pocket" (which was really not the case). Had it not been for those scholarships, I would not be getting a degree! That being said.. I still have about $15000 to pay back in student loans. Maybe you can see if you can set up an account that would not be considered an asset when your child is applying for aid.

Finally, and this is the worst, sorry, please realize that formal education is not for everyone. I have several friends who opted out of higher education and are very successful and happy people. Once she has a dream, offer her the money to help finance her goals. But no, definetly do not just let her take the money and run. Unfortuneatly there are several others I've known that were "going to school courtesy of mommy and daddy" AND BELIEVE ME - THEY WERE NOT GOING TO SCHOOL!

Hope that helps...

 

[tkd lisa]

Most banks and credit unions have folks who can help you with this.

I will tell you that there are a variety of plans for kids college savings, and those plans have all different rules. For some of them, the money must be used for expenses related to higher education (by the way, that can vary from paying for tutors, to buying a scientific calculator, to paying for Sally Sue's Beauty School).

One specific one that has very little limitation is the "uniform gift to minors act" (also known as UGMA). The age they can get the money varies, but that is designated as a gift, so once they reach the age, they're entitled to the money. As I recall, that one isn't limited as to amount placed per year. I know we put some money in one of those this last year for each child, but here in MD, it's 21 to get it out, so I figured that they'd be less likely to blow it at 21 than they would at 18.

 

[chris7]

We set up 529 plans for both our daughters when they were born. One of the attractive things is that unlike some other college savings vehicles, money in a 529 plan remains the property of the person who opened the account (in this case the parent). If they decide not to go to college, they do not get the money. If, however, they don't go to college and I want to get the money out of the account someday and use it for my own purposes, I will have to pay penalties (10% ?) to get it back. But that's the same with any tax-deferred savings plan. Theres a website called savingforcollege.com that explains the details and pro's and con's of a variety of savings plans. I'm big on getting very educated about things like this so I can make the right decision for my family (so I'm in the middle of researching for our Disney trip now!!!).

 

[EthansMom]

Sounds like they were discussing a Uniform Gift to Minors account where the money is taxed at the child's tax rate, but is the property of the child and therefore can only be used by or for the benefit of the child.

I have Education Savings Accounts (formerly called Coverdel IRAs) for our kids. The think I love about them is that, as the custodian for the accounts, I am in control of the money and I can transfer the account into the name of another family member if I choose to do so. So, if my child screws around and doesn't study hard, I can transfer the account into the name of someone else or we could withdraw the money and take the tax and 10% penalty on profits to get the money back. You have to use or close the ESA account by the time the child turns 30, so you could always leave the money there and hope they turn around. Plus, withdrawals from an ESA can be used for private primary, middle, or high school as well as college, and reasonable books, supplies and computer expenses related to education.

The rules for 529 plans are similar to the ESA rules, but 529's are organized by states and have different investment options for each state that organizes it although you can invest in another state's 529 and use it in any state (weird, huh?). Plus, you can invest more in a 529 plan.

At any rate, you may want to check out http://flagship3.vanguard.com/VGApp/hnw/content/AccountServ/College/ATSCollegeOVContent.jsp for more info.

Good luck!

 

[ruebeesoho]

529 Savings Plans have many great benefits. UPromise offers some through their website if you have an account. They have some good info to get you familiar with 529 plans and you may want to check into their free savings program through everyday purchases. Also check out Bank of America's website they have a huge amount of info on different savings plans.

 

[funcinderella]

Definitely do Upromise. Also, check into the best states' plans for 529s (not necessarily your own state's.) NY is a highly rated one. Plus, in NJ anyway, the money can be transferred to a sibling or first cousin without penalty. Also, for right now anyway, if you have the account opened by a grandparent, instead of a parent, it's not figured into the financial aid equation since it is owned by the account owner, not the benficiary. They may close that loophole in the future.