Savings Accounts for LO?

hopefuldog · January 2014

I'm starting to look into different options for savings accounts for LO (FTM mom here), and I'm wondering what all of you ladies currently do or plan to do. College isn't getting cheaper and I'd like to get started right away putting some gift money from our shower right towards LOs future. Thanks!

dunvilles · January 2014

Look into the college savings plan for your state. I know for my state we get a big tax credit.

shellbell3845 · January 2014

We will open a savings account, but we need to wait until we have a social security number for LO.

rachaelmary · January 2014

RESPs are a great product!

hopefuldog · January 2014

shellbell3845 said:

We will open a savings account, but we need to wait until we have a social security number for LO.

That's what I was thinking, thanks!

I'm mostly familiar with the 529 accounts, but I've heard they've undergone quite a few changes in the past few years, and of course not for the better.

MamaAllison · January 2014

We have a 529 plan for DD1 and will do another one for DD2 once she is here/ has a social. I'm sorry I can't give better details - DH and my investment advisor are in charge of that stuff

I do know that different states have different rules and benefits, and that you can invest with any state no matter where you live, so it is worth doing your research. If you want a recommendation off a good financial advisor, let me know, I really like mine.

ShePersisted · January 2014

lowea1 said:
I'll be watching this thread. MH wants to open a 529 for college, but I'd rather put the money elsewhere---just not sure where yet!

My H has been doing a lot of research on this and he told me we are better off investing elsewhere for the also than the 529. He told me that's it's better of paying federal loans for the kid in college as the rates are so low. He also said things like there is a chance for investment to be under utilized if your kid ends up getting a scholarship or choses not to go to college. He works in finance so for him money put away for future has less value ( or something on those lines). I have to sit down with him to discuss but all we have now is a good insurance policy for both of us to cover the child Incase something happened.

slwprincess · January 2014

Our credit union offers a savings account for kids so each one has one set up and we do automatic deposits each month. But they aren't really earning anything so eventually, when my pregnancy/mommy brain is better, I will try to set up something more advantageous. As the pp mentioned, we have to have a name, DOB, and SSN before we can set one up for this LO. Considering that I just set up DD's last month and she's 3... I guess I'll get around to doing this one in 2017. I'm on it.

PeachLove25 · January 2014

Federal student loan rates are low?!?! I'm assuming you don't live in the U.S. because most are over 7%. Definitely doing a 529. If your child gets scholarships, there are other granted uses for the money such as living expenses, books, study abroad, etc.

LetoileDuNord · January 2014

With a 529 in my state (MN) you are able to recoup the cost of the scholarship if your kid is able to get one. I have no idea if that is the norm.

Another thing to keep in mind is that student loan interest rates could change over the next 18 or so years until our kids would be going to college.

My plan is to start automatically investing a small amount of each paycheck in a 529 within the first year.

Giraffealaff · January 2014

I've been thinking about the Gerber Baby Fund, however my investment savvy Uncle is steering us towards a 529. I still have a ton of research to do, however it's my understanding so far that the 529 can ONLY be used for college, where as the GBF can be used for other things as well.

hopefuldog · January 2014

cat2222 said:
I mostly lurk, but I've done a lot of research on this topic. We actually opened a 529 in 2013 in my name to get a state tax credit for that year. You can change the beneficiary of a 529 once per year, so we'll change it to LO when she has a name and SSN. So, like was said above, you can change it in the future to a sibling or cousin if your kid doesn't go to college. The list of eligible educational expenses is pretty long and even includes computers as of last year. You can withdraw an amount equal to a scholarship if your kid gets one too. The best reason to use a 529 vs a regular account is that the earnings grow tax free, which means it grows faster than a taxable account (like a Roth IRA). And even if you really need the money for non-educational reasons, you can take it out- you just pay taxes on the earnings plus a 10% penalty. Not that that would be a good plan, but the money isn't "lost". Finally, you can invest in any state's plan- you would only pick your own if you get a state tax credit. If you don't get a credit (or don't have a state income tax) pick Utah. It has one of the best low cost plans, but there are a ton of sites that compare the state plans.

Wow, all great info! Thanks! Glad I'm not the only one starting to look now.

mythaldo · January 2014

We're planning on doing our state's college savings program, too. Thanks for the reminder on that though, because I almost completely forgot about that!

Fullerj21 · January 2014

We will be setting up a 529 once baby is born. My grandparents set up a 529 for me and it was wonderful. The money could be used for tuition, rent, food, books, supplies, etc.

sdlaura · January 2014

We have a savings account through ING/Capital One and a 529 plan for DD. one thing to note is that you don't have to use your own state's 529 plan. We live in CA but use the Nevada 529 plan because the investment options are better. We put cash gifts to DD in the savings account, and we contribute monthly to the 529. It is actually in my name - like a PP said, you can change the beneficiary anytime, so we started it before DD was born.

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