Saving for college

[fitgirl36]

Hello, as soon as I found out we were having a baby I started a saving account for my now DD who is 20 months. I keep depositing whatever I can a month and now have a nice little savings account built up earning next to no interest! Can someone recommend what the best way is to get more interest earned on a college savings other than a savings account? A 529? CDs? Thank you for any help.

 

[mjkacmom]

I didn't research it much, because DH is a CFP, but we have 529's for all of our children (not our state).

 

[uva185]

Considering you have about 17 years left to save I'd personally consider an investment option with some risk, like a Mutual Fund. With 17 years to go you should be able to get a nice ROI. The downside is you'll have to pay capital gains taxes each year on the earnings. You should really talk to a financial planner who can develop the best portfolio for your needs.

 

[KennesawNemo]

I invested in a 529 plan for my son.

Depending on where you live, this might offer some tax saving. In our state, the first $2000 annual saving in 529 is state tax free.

You can just choose a Target fund. Say your kid will go to college in 2030, then choose a Target 2030 fund. It will start with a high risk, but will adjust donw annually. That's the easiest thing to do if you are not very investment savvy yourself.

 

[annabanna]

We have 529's for our kids. I would stay away from CD's, they just usually don't have the best interest.

 

[crisi]

We have 529s as well. We chose our state plan, which isn't the best in terms of fees, but I'm expecting changes to state taxability of these plans before I get the money out. I may be wrong.

The most important thing is saving regularly.

 

[rascooby]

We have 529 plans for our girls. We have the money taken out of each paycheck automatically and we've been doing it long enough that we don't miss it.

 

[ilovemk76]

Hello, as soon as I found out we were having a baby I started a saving account for my now DD who is 20 months. I keep depositing whatever I can a month and now have a nice little savings account built up earning next to no interest! Can someone recommend what the best way is to get more interest earned on a college savings other than a savings account? A 529? CDs? Thank you for any help.

A 529 is a good way to invest. Vanguard has great 529 plans.

 

[lisaross]

I have a couple of mutual funds that i started years b4 having kids. I will probably use the money in those to help pay for college - it definitly won't be enough but my mortgage will also be paid off right b4 my oldest starts college so that will help as well...

 

[sunlover13]

We have 529 funds also for our kids.

One thing to keep in mind is the 529 fund can only be used for education.

We max out our Roth IRA each year first, then contribute to the 529's. The Roth IRA $ can also be used for education and whatever else you want so you won't lose this $ if your child decides not to go to college or gets a full scholarship, etc.

I believe you can put $5,000 into your Roth IRA each year.

We have both of these deducted from our checking accounts on a monthly basis.

If you do not have a financial planner, I suggest getting one. We have one and we do not have to pay him so why not utilize his knowledge.

 

[fitgirl36]

Thanks everyone! Appreciate the help!

 

[clh2]

We have 529 funds also for our kids.

One thing to keep in mind is the 529 fund can only be used for education.

We max out our Roth IRA each year first, then contribute to the 529's. The Roth IRA $ can also be used for education and whatever else you want so you won't lose this $ if your child decides not to go to college or gets a full scholarship, etc.

I believe you can put $5,000 into your Roth IRA each year.

We have both of these deducted from our checking accounts on a monthly basis.

If you do not have a financial planner, I suggest getting one. We have one and we do not have to pay him so why not utilize his knowledge.

Our financial planner also recommends the Roth. FOR OUR SITUATION - THIS HAS BEEN GREAT! We didn't start doing the 529's until the past few years. DD starts college in the fall. One of the advantages of the Roth-strategy - we only have DD. So - if DD decides to drop out of college, etc, we won't be "stuck" with money in a 529, that we need to figure what to do with.

 

[TheRustyScupper]

1) We bought "guaranteed" 529's for both granddaughters.
2) They now have 4-yrs of college paid in-adavnce.
3) One heck of a deal !!!

 

[crisi]

The penalty is only on the earnings, and its 10% - in addition to it being taxed as ordinary income. But the principal will not have a penalty on it.

Also, the penalty won't be applied if your child gets a scholarship (or, God forbids, dies or is disabled). You can also move the money to another beneficiary (in our case, unused money will be set aside for grandchildren, although I expect that it will get used in a graduate degree for my daughter even if my son doesn't use all of his).

It isn't a good idea to oversave in a 529. Few people who have kids going to college are going to have that risk.

 

[teacup princess]

We have 529's for our four kids. If I'm not being too nosy can I ask how much each of you contribute. I try to contribute $100 per kid each month (so $400 per month. We've definately had months (and even one whole bad year) where we did not contribute at all. We do what we can but I often wonder if this is enough.

 

[MrsPete]

First and foremost, that you save is about a thousand times more important than exactly where you save.

Our kids' college savings is in two places:

1. The safety deposit box. Yes, really. Over the years they've received a number of Savings Bonds from relatives, and we've tucked them all away. This isn't a significant amount, but it's something.

2. A savings account at the credit union. They give a better interest rate than the bank where we do our checking. From time to time when the kids were younger I'd withdraw money and put it into a CD for a time, then hold onto it again when I thought that the interest rates were not "enough". We might've done better in a more risky location, but we were satisfied with that.


Now that college is upon us, and it's only months 'til I'll pay that first semester's costs, I'm so glad that we started when you did. When you start early, the magic of compound interest works in your favor.

 

[eyeheartgoofy]

I was in a similar position to you, OP. I knew I needed to save, but wasn't sure where to save ... so I just threw some money into a separate savings account each month starting when my first was an infant. When my second DD was born, I finally did a little investigating and decided on our state's 529 plan - filled out the paper work, used the savings account balance as the initial deposit, and set up automatic deductions. It was pretty easy once I finally got past the mental hurdle.

 

[amcnj]

Definitely look into 529 plans. Start with any your own state offers as they sometimes have additional benefits such as allowing state income tax deductions for contributions, or in my state's case a "scohlarship" of up to $1500 if the child attends a state school.

 

[crisi]

We have 529's for our four kids. If I'm not being too nosy can I ask how much each of you contribute. I try to contribute $100 per kid each month (so $400 per month. We've definately had months (and even one whole bad year) where we did not contribute at all. We do what we can but I often wonder if this is enough.

The answer to that is going to vary a lot. I have one that is likely to go to private school then grad school. She is just the type. And another who is likely going to be a four year state school kid. there are only two kids. We also aren't likely to get financial aid, and have low expenses for our income...for us, we put a lot of money toward college, and I know it won't be enough and my daughter will have grad school loans.

 

[ICF]

The state of Indiana has a great 529 plan. Residents of the state get a 20% tax refund (not credit) of the 1st 5000 that you put in. So, if you deposit $5000 a year in there as part of your tax return the following year you get an automatic $1000 back.

We have a EFT done on the 1st of each month to deposit $150 for each of the two kids and then throw some extra in through out the year to ensure that we at least deposit $5000 each year.