College fund?

kristen714 · April 2014

How did you choose to invest for your child's college? My husband and I aren't sure which plan or investment strategy is best. Thanks!

traveltheworld · April 2014

We put about $3,500 every year into 2 or 3 blue chip stocks that pay a dividend of at least 3.5%. Our goal is just for the portfolio to have steady growth - looking for 6% annually after adjusting for inflation. We figure it should cover tuition at a state school for undergrad. DS would have to work and save for his own room and board.

We also bought a rental property which is cash-flow positive, and the idea is that in 18 - 20 years, the property would be fully paid off and if we need to, we'd use the moeny from selling that property to fund DS's higher education (professional school, masters, etc.). But we don't plan on telling him that as we'd like him to plan and save for any schooling.

kristen714 · April 2014

Thank you for the response. That is an option we hadn't looked at.

jf198400 · April 2014

We are just investing a small amount monthly in our state 529k. It won't add up to very much, but I believe in working for scholarships and taking out loans.

TheBorg7of9 · April 2014

Our investment advisor recommended the Virginia 529 plan because it can be used for college in any state. We also have a trust savings account under the uniform trust for minors act

kristen714 · April 2014

I need to research the 529 more. I am under the assumption that it can only be used for college and that if a student earns a full scholarship then you must pay a penalty fee? As much as I want her to go to college what if she chooses a trade?

jf198400 · April 2014

kristen714 said:
I need to research the 529 more. I am under the assumption that it can only be used for college and that if a student earns a full scholarship then you must pay a penalty fee? As much as I want her to go to college what if she chooses a trade?

If you are planning to have more than one child, you can transfer the funds between beneficiaries without any penalty. I figure with 3 kids we are bound to use the money for school.

jlaOK · April 2014

We have 529s for the kids. They aren't through our state. We chose a 529 that invested in mutual funds similar to what are in our Roth's and that we like.

We ultimately chose 529s because the chances that our kids will go to college and have at least something to pay for (room & board, books, etc.) is extremely high. Earning a scholarship is considered an exemption and I believe you can take the equivalent money out without penalty. If for some reason they don't go to college we figure that they will have two choices - they can take the money out to use for other purchases such as buying a house (although they will have to pay taxes and penalty) or they can keep the money in the 529 and roll it over their own future kids or whoever they want. Obviously I would hope they'd do the latter. I actually like the thought of their leftover college savings being able to benefit multiple generations.

jasminelorraine20 · April 2014

I'm Active Duty military so I will be passing my GI Bill down to my LO.

mae0111 · April 2014

We have 529's set up through Fidelity Investments. Our state does not offer any sort of incentive for using the state's plan, so we chose Fidelity because we have other investments there.

They do offer an Amex card that will send 2% of all purchases to up to 4 different 529 accounts. We're thinking of getting one. We have cash-back amex cards now, and with all of the travel that DH puts on his card for work, we get a good amount back that we just tend to apply toward whatever balances we have, or use for gift cards. 2% into a 529 seems like a better investment.

In addition, we have earmarked all of the stock that we receive as incentive compensation toward education. Since we're pretty sure that we'll be sending the kids to private school, we don't want to put it all into a 529. We're leaving it in a standard brokerage account.

cecilyandgautam · April 2014

kristen714 said:

I need to research the 529 more. I am under the assumption that it can only be used for college and that if a student earns a full scholarship then you must pay a penalty fee? As much as I want her to go to college what if she chooses a trade?

It can be used for any accredited post-secondary education related expenses. So even if your kid decides to go to fashion school or culinary school, as long as it's accredited, you're 529 funds can be used for it. At least that's the case for my state - I'd read up on yours of course.

For my state, the kid has until age 30 to use the funds. They can be transferred between siblings and can apply to tuition, room, board, fees, books, study abroad, transportation to and from campus if you have to move there to attend - just about any expense related to being a student. Can also go to graduate degrees - we anticipate most of our kids will get a graduate degree so any unused 529 funds due to scholarships will be theirs to use for grad school.

To the original question, we're mostly using a 529 and putting in notable chunk every month - I used some basic college savings calculator to estimate how much we should target, and then I rounded up. I have it on auto contribution and I'm aiming to be able to pay for a full ride at an in-state school or cover tuition (but not room & board) at a private college. We'll probably be in a position to provide at least some monthly support when the kid is actually in college as well, so if hypothetically one of our kids got into an ivy without scholarships, we'd do what we can to make it easy for them to attend. We're not saving up for grad school, but like I said anything unused from the 529 after undergrad will be theirs for grad school.

*sparky* · April 2014

We are taking advantage of our state's 529 plan, because we get a tax deduction for contributions up to $2,50 (and I live in a high-tax state). It is also managed by a very reputable investment company so we were very happy with the investment options.

As far as investment choices, we are invested in a target fund that is aligned with the year DS graduates from high school.

CarrieB. · April 2014

We have 529s for both girls. We put in a small amount every month and my parents make a gift for them at Christmas. Starting this year, I also plan on putting part of my annual bonus into their accounts.

ashleysbf · April 2014

We have a 529 too. We put in $100 a month and my parents put in $50 month. Hopefully someday we can put in more, but right now, that's all we can do.

Pips09 · April 2014

We use a regular savings account. We put money in every month.

ss265 · April 2014

@mal922, how did you decide which state fund to use? Would you mind sharing any resources you used to make your decision? I live in Texas also and could open a fund with any state but am feeling a little overwhelmed with all the different choices. What kind of features did you look for?

Thanks!

jlaOK · April 2014

mal922 said:

Our investment advisor recommended the Virginia 529 plan because it can be used for college in any state. We also have a trust savings account under the uniform trust for minors act
We also opened a Virginia 529 account. In some states, you get state tax benefits for participating in your state's 529, even though the funds can often be used for out of state tuition. We are in Texas and don't have to pay state income tax, so we just went for the one with the fund selections and other features we liked. We made one decent sized contribution so far with money DH made from exercising some stock options through work. My ILs have also been putting $100/mo in a separate account for DS. We aren't necessarily assuming that DS and any other kids we may have will go to private college and grad school, etc., but our financial advisor told us we would need around $100k in today's dollars to put one child through four years at the local state universities, so we figured it is never too early to start.

We also have Virginia's 529 plans for the kids. Like you, we liked the funds it invested in. Oklahoma has a 529 and offers a tax credit, but their 529 sucks so I'm happy to forgo the small tax incentive.

jlaOK · April 2014

ss265 said:

@mal922, how did you decide which state fund to use? Would you mind sharing any resources you used to make your decision? I live in Texas also and could open a fund with any state but am feeling a little overwhelmed with all the different choices. What kind of features did you look for?
Thanks!

You didn't as me, but I'll answer for what we did. Do you have a financial adviser or RothIRA's? If so I'd talk to them. We have been happy with the funds in our Roth's so our financial adviser pointed us in the direction of Virginia's 529 plan which invests into many of the same funds.

I'm no expert, but my understanding is that there are a few different types of 529s. Pre-paid college, those that automatically move the money around based on the age of your child, ones where you control where your money is invested. We wanted full control over where our money was invested therefore eliminating many plans. From there we picked a state based on the fund options available.

ss265 · April 2014

jlaOK said:

ss265 said:

@mal922, how did you decide which state fund to use? Would you mind sharing any resources you used to make your decision? I live in Texas also and could open a fund with any state but am feeling a little overwhelmed with all the different choices. What kind of features did you look for?
Thanks!

You didn't as me, but I'll answer for what we did. Do you have a financial adviser or RothIRA's? If so I'd talk to them. We have been happy with the funds in our Roth's so our financial adviser pointed us in the direction of Virginia's 529 plan which invests into many of the same funds.

I'm no expert, but my understanding is that there are a few different types of 529s. Pre-paid college, those that automatically move the money around based on the age of your child, ones where you control where your money is invested. We wanted full control over where our money was invested therefore eliminating many plans. From there we picked a state based on the fund options available.

Thank you! BTW, I love your son's name - Caden. We have been struggling picking a name for this LO and I might end up stealing this name, if you don't mind.

jlaOK · April 2014

ss265 said:

jlaOK said:

ss265 said:

@mal922, how did you decide which state fund to use? Would you mind sharing any resources you used to make your decision? I live in Texas also and could open a fund with any state but am feeling a little overwhelmed with all the different choices. What kind of features did you look for?
Thanks!

You didn't as me, but I'll answer for what we did. Do you have a financial adviser or RothIRA's? If so I'd talk to them. We have been happy with the funds in our Roth's so our financial adviser pointed us in the direction of Virginia's 529 plan which invests into many of the same funds.

I'm no expert, but my understanding is that there are a few different types of 529s. Pre-paid college, those that automatically move the money around based on the age of your child, ones where you control where your money is invested. We wanted full control over where our money was invested therefore eliminating many plans. From there we picked a state based on the fund options available.

Thank you! BTW, I love your son's name - Caden. We have been struggling picking a name for this LO and I might end up stealing this name, if you don't mind.

Go for it! We call him Cade for short which I equally love.

Crequito · April 2014

We put $1000 in an account for DD from our tax refund and plan to do so every year (dividing it up between the kids if we have another) and we're adding any cash relatives give her while she's too young to understand (so until 4 or 5??). DH and I also have $25 taken from every paycheck and put into that account (so $1300 a year). We'll let the account grow and give it to DD when she graduates high school to use towards college or a car/spending money if she gets a scholarship. We also took out a life insurance policy that we can cash in for $20,000 when DD is 18 if needed.

Soon2BMrsN · April 2014

We have/will have a 529 and a regular savings account for each of our kids. All accounts are deposited into monthly.

thedash · April 2014

Another vote for the Virginia 529. We actually do live in Virginia and get a small state tax benefit, which is an added bonus.

College fund?

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