saving for college

jenmbott · August 2013

How are you doing it? 529? Educational Savings Account? Investing in your own funds/stocks? I don't quite understand the benefit to the ESA or the 529 plans? I know that the money grows tax free but if the child chooses not to go to college then the money gets taxed like hell. I feel like it would be better to invest heavily in some aggressive stocks while DD is young and then move the money into more conservative stocks as DD gets older. I know that with the latter option that the money will be taxed while it will not with a 529 or ESA but it seems like a better option than having so many limitations like the 529 and ESA. Inform me.

BPer · August 2013

mssm2012 said:

We have a 529. Money goes in after tax, we don't get any deductions or credits... But the penalties if we withdraw it for non-educational expenses aren't actually that bad. You pay income tax and a 10% penalty, but it's ONLY on any gain (not on the principal). You can transfer the money to your other kids, or even use it yourself, and there's no penalty or tax (if for erucation). The rules for what counts as educational expenses are pretty generous, it's not just tuition or traditional college classes.

This. Plus, we have a separate savings account for after she graduates college (or if she doesn't go to college, when she's buying a house/getting married etc.) where we put all birthday, and baptism money, and a couple hundred dollars every couple of months. Once she is old enough to work, we'll make sure she puts a % of her paycheck in there. H's parents did this for him, and he had about 15k in there that he used as a down payment on our house.

watercolor5 · August 2013

We're doing a 529 too. I'm pretty sure at least one of my kids will end up going to college, or some kind of further education that will be able to use the funds, and I'm sure we won't be able to have enough stashed in there to completely cover 4 years of tuition for each of them, so it will be a shared account between our kids. I'm not worried about using the funds for non-educational expenses with 2-3 kids. You should be able to check with your state's 529 plan and get an info booklet that will explain the plan for your specific state in detail. (At least that's how GA does it...)

Other than that, we have life insurance on DH, retirement through his work, we each have an IRA, and we have stocks/mutual funds, but that money is obviously for life in general. We'll go through our more liquid funds in the next year or so when we buy a house, then start rebuilding it up.

hmp1 · August 2013

A 529 for each kid. While I don't think college is for everyone it will be expected in our family. We also have a 15 year mortgage to free up some cash when they start school.

linzeek44 · August 2013

We have a 529 that is set up to be more aggressive now and less so as he gets closer to 18.

mrsbhk22 · August 2013

mssm2012 said:
We have a 529. Money goes in after tax, we don't get any deductions or credits... But the penalties if we withdraw it for non-educational expenses aren't actually that bad.

You pay income tax and a 10% penalty, but it's ONLY on any gain (not on the principal).

You can transfer the money to your other kids, or even use it yourself, and there's no penalty or tax (if for erucation).

The rules for what counts as educational expenses are pretty generous, it's not just tuition or traditional college classes.

All of this. We were selective on our plan as we wanted trade schools to also be included. We live in ohio but chose a plan out of Virginia. Don't think you only have the option of the one in your home state.

BlueViolett · September 2013

We are using a DRIP fund with Proctor and Gamble.

[Deleted User] · September 2013

Wait, we're supposed to save for college?!

We have a regular savings account for her right now.

hmp1 · September 2013

jonesaj said:

Wait, we're supposed to save for college?!

We have a regular savings account for her right now.
Good point. I read that you should save for retirement before college.

I completely agree with this. Figure out your retirement savings plan first and don't dip into those funds for college savings. We know how much we have to save to have xx dollars at age 65 when we want to retire. Some of our investments are risky, because we are youngish, but we should be good with our plan.

MarisaKathleen · September 2013

We have a Upromise account as well as a separate 529 account set up in my name. With the upromise we're able to contribute electronically automatically each month, which I like.

I understand saving for retirement as well....since I have a state pension I'm only able to contribute what the state allows, however my DH puts 9% in his 401K. I also have an IRA that I contribute to.

In all honesty, we have around 10K saved for N's college already and if that doubles over the next 17 years, I'd be fine with that, but I'm not going to bust my ass trying to save money for her. I paid for college out of pocket, and so did my DH. I have no intention of paying for all of her schooling. I'm also hoping that I'll still be a state employee so that she can get free/discounted tuition, but that's a reallllly long time from now.

Flamingemu · September 2013

DH & I are still splint on paying for college. DH insists on paying for 4 full years of college, but I had loans for 2 years of school. We started a 529 for her, but right now while we are settling into DC costs, we only contribute $200 a month. We will bump that up in the next year or so. We will discuss what to do when L gets older and we know what college costs may look like.

melody921 · September 2013

We're doing a 529. There are so many options aside from traditional college. I remember there was a golf school on the list of "approved uses."

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