Paperwork Drill: College Funds

lyse01

Gotta start saving and applying for scholarships now, amirite?

Are you planning on setting aside funds for your child’s education? Are there tax benefits to doing so? Can you shop around different states for the best program? What if your kid doesn’t end up at the state school (or any school) - where does the money go? When can you set up the fund (like, does it need to be after the kid has a birth certificate and SSN?), and what advantages are there to doing so sooner rather than later?

Are you planning on even trying to get this sorted before birth?

feel free to add any other thoughts about the future of higher education too!

Want to discuss something else? Recommend it here, or second some recs by loving someone’s post (I’ll try to prioritize): https://forums.thebump.com/discussion/12734953/product-spotlights-upcoming-or-requests I’m keeping it all in the Product Spotlight thread because I don’t feel like it needs its own.

All paperwork drills can be resurrected at any time for further discussion - type “Paperwork Drill” into the search bar at the bottom of the page to find previous threads.

kosmo86

We just set up a 529 savings plan after DD was born. We put 500 in to start and then have added 100 a month since. You cannot set this up until after you have a social security card for them. So it can't be set up before hand. 

thatbaintforbetty

No. We probably won’t put aside money specifically for college. 

Honestly retirement funding comes first. We are not counting on social security and that’s a reality I don’t love but won’t ignore.

The girls can borrow or work towards college costs, it’s not ideal but neither is the current state of the enconomy/education costs/retirement. If we happen to be in a better position to help when the time comes we will. 

I do have a custodial account for DD with some money set aside for whatever she decides to use it for when she reaches the appropriate age. It could be used for college expenses if she wants. I don’t expect it to be grand but unless we become very very wealthy that’s what we are working with. 

lovemaddux

Once we got DS ss# we got him a savings account at our credit union and a college saver cd. Interest was favorable with the cd and we don’t have any intention on spending it so it will be locked in every 5 years. We put in $100/month and any birthday or extra money goes there. This kid is a saver and wants everything in his piggy/dinosaur bank!

For our next one we’ll do the same. Although we may lower first DS to $50 until I’m back at work. I think it’s important to set them up with something, even if there’s only a few dollars. 

mrstmoose

We have a 529 open for DD but are not contributing regularly until we are out of debt. We opened it when she was around one year old. We will contribute on a monthly basis in a year or so. You cannot open a fund until you have their SSN. 

We chose our state's 529 since the compound rates are good. My mom has a Roth IRA for DD (and will for all grandchildren) but that is for when DD is an adult and for a down payment on a home or something "big."

rennie1108

We have money set aside for LO that I received from my sister's life insurance policy. Right now, though, it's invested, so we're hoping to make money on it and then I don't know where we'll put it exactly.

professormama

Both my husband and I were lucky enough that our parents paid for our undergraduate education, which enabled us to start married life basically debt free, and allowed me to go to graduate school (I incurred a small debt during that time, but since I didn't have undergraduate debt it felt very manageable). Because we want to be able to do the same for our children, to the extent possible, we have started college savings.

We set up a college fund for our first, and will be doing the same for this child. As others have mentioned, we chose a 529 because it seemed to have decent interest rates and was flexible in terms of being able to be used for either state school or private school. More about 529s here. One advantage to a 529 is that you can change the beneficiary, so if one child decides not to go to college we can simply use the set-aside money for a different child, or even for a grandchild down the road. Another advantage is that it doesn't have to be used for college specifically, it can be used for other "post-secondary learning." So, if a child decides to go to culinary school or trade school, that counts too. The kind of account you want to set up will probably depend on your family's attitudes about education. My husband and I don't feel like our child HAS to go to college or trade school, but we are setting up college funds in case they want to. However, I have zero interest in just giving them the cash to do whatever they want to do with it, should they decide that they don't want any further education. We view education as very important in our family, and we aren't interested in giving our child a bunch of money to NOT go. Therefore, we didn't have a problem with setting up a financial account that HAS to be used for educational purposes. However, if you want to set up a savings fund for your kid that can be used for something other than education, a 529 might not be as good a choice. 

We basically dumped $1,000 in the account to start with (what we felt we could afford), and we contribute $200 a month automatically (and again, we will do the same thing for new baby). We figure this should be a pretty good nest-egg by the time they're 18. It might not cover everything, but it will be a good start. 

kosmo86

@professormama - I agree with the hopes of paying for LOs college. I did go to school with full scholarships but I still had to take out student loans to survive. We got pretty lucky as I bought a house right at the end of the recession in 2012. the house MORE than doubles in price and when we sold it and bought a new house I was able to take the proceeds and take out all of our student loans and credit card debt. I would love to teach my kids financial basics while still starting them out with a clean slate

HGRich

I agree with @thatbaintforbetty in that our retirement funds are higher priority for us. We want to be able to support ourselves so our kids don’t have to as much, and that’s a guaranteed need, whereas we don’t know if our kids will choose college or not. 

My parents raised me with the knowledge that if I wanted to go to college, it was totally up to me to figure it out. So I got in, worked throughout college, on campus for work study and off campus for extra money, and graduated debt free. Same with my husband. We plan to encourage our kids to do the same. OR to pursue trade school. 

That said, we might set aside a small amount to gift them to use when they turn 18. Either for college, for trade school, or to invest in a down payment on property or a car. That kind of thing. 

kaitykins

Huh, well?
we are still paying off DH loans. Paid mine off faster because their interest was higher. His are on a special plan because we work at a non profit so after 120 monthly payments on the income based plan the loan remainder will be forgiven. We have like 6-7 years to go on this. 

That being said, we have barely started retirement savings so that’s priority and saving for a down payment on a house. Kids will need to work to get college sorted out on their own. I’m hoping to homeschool and do two years of junior college as their junior senior year of high school. Or at least some of the courses. This is typically covered under public education $ and can give the kids a head start and save on college. Anyway, they can work for college in high school and college and we will help them make good choices. 

HGRich

@kbirchtree yes to dual credit. I did a couple of those while homeschooled in high school. I will be considering that for my kids also. Junior college is a great option.