College Funds

camichael84 · April 2014

So as I'm sitting here doing my homework and realizing that DH already has and that I will acquire more than the national average amount of college debt, I've started putting more thought into investing in a college fund for LO. Does anyone have a college fund currently set up that they recommend or one that they are considering?

emmylu30 · April 2014

We have a 529 college savings account setup for DS which functions similiarily to a 401K in regards to setting up allocations and investments which has actually done really well so far. I believe they are ran by the states. Our concern is what would happen to the money if DS chooses not to go to college in which you would get all of the initial investment back but none of the earnings. I think there are other things you can use the money for without losing the earnings but pregnancy brain strikes again and I cant remember so you may want to research with the 529 program in your state.

mana8503 · April 2014

I think we will start a mutual fund for college savings. They have a historically high rate of return and you won't get penalized if college isn't the track our kids want to go.

Just remember to fully fund your retirement first before college. Your kids can get a loan for college you can't get a loan to retire.

JustCricket · April 2014

I'm with @mana8503‌ we're still trying to get to a point where we're comfortably putting into retirement. My parents didn't pay a dime of my or my brothers' educations. If I can help I'll be happy if not, its not the end of the world. That's what scholarships and loans are for.

Edit-mobile bumping suck s

chardonnay24 · April 2014

We have a 529 set up for our kiddo. It's through our state so that we qualify for state tax deductions. It is low on our priority list, though, because I am a SAHM and have massive student loans, so we're trying to save for retirement and pay off my student loans before we pay for our kids' college.

JustCricket · April 2014

chardonnay24 said:
We have a 529 set up for our kiddo. It's through our state so that we qualify for state tax deductions. It is low on our priority list, though, because I am a SAHM and have massive student loans, so we're trying to save for retirement and pay off my student loans before we pay for our kids' college .

This. We have our own college shit to pay off. Not much.. but its still there.

cmumama · April 2014

We have 529s set up for both kids and will do the same for this one.

ETA: Even with the 529, we'll never be able to afford to pay for 100% of their college.

mariaculbreth · April 2014

My FIL set up a gerber life account for DS. He already has a savings account. Someday when we are not lazy we will set up a 529.

rlyttle · April 2014

We have a 529 plan for DS. We put $50/month into it and any birthday or Xmas money he gets. We have about $4000 in there now. We will do the same for this LO.

kleigh926 · April 2014

We do not have a college fund for DD and won't for this LO either. We have put aside in our savings account any money she has gotten from family for holidays/birthday and I have added some extra money in there at times too. This is what we'll continue doing until a certain age (probably 18) where we'll tell her we have this money set aside and she can decide what she uses it for- college, a car, living expenses if she goes right into the workforce, etc. The cost of tuition these days is so high I don't think we have any hope of saving enough to totally pay for it. I would rather save a set amount every month for retirement and save what we can for college, but not stress about it.

JSS1002 · April 2014

Mutual fund and savings account here. We want to make sure that he can still use the funds if he doesn't go to college, or wants to delay education.

mrsdanielleM2010 · April 2014

Heywhitney said:

529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

That's what my mom thought too, and then my brother was diagnosed late with several learning disabilities. Missing early diagnosis created huge gaps for him, and despite all the intervention and hard work in the world, a GED was the best he could do. I have a MA, my sister has a BS, he makes more than the two of us combined as a construction worker. Sometimes higher ed just isn't in the cards.
ETA I'm not sure what we will do to save for the LO's college. I went on scholarship and DH had his covered by a wealthy relative.

mana8503 · April 2014

mrsdanielleM2010 said:

Heywhitney said:

529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

That's what my mom thought too, and then my brother was diagnosed late with several learning disabilities. Missing early diagnosis created huge gaps for him, and despite all the intervention and hard work in the world, a GED was the best he could do. I have a MA, my sister has a BS, he makes more than the two of us combined as a construction worker. Sometimes higher ed just isn't in the cards.
ETA I'm not sure what we will do to save for the LO's college. I went on scholarship and DH had his covered by a wealthy relative.

My stepson has high functioning autism. College just isn't in the cards for him. If he finds his niche in life and is happy, then that's good enough for us.

My H wasn't much for school, but is a hell of a mechanic. He went into the Army, did 10 years and is now a truck driver. Military and trade school are good enough for us.

Sometimes you have to plan for the unexpected...

JustCricket · April 2014

mrsdanielleM2010 said:

Heywhitney said:

529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

That's what my mom thought too, and then my brother was diagnosed late with several learning disabilities. Missing early diagnosis created huge gaps for him, and despite all the intervention and hard work in the world, a GED was the best he could do. I have a MA, my sister has a BS, he makes more than the two of us combined as a construction worker. Sometimes higher ed just isn't in the cards.
ETA I'm not sure what we will do to save for the LO's college. I went on scholarship and DH had his covered by a wealthy relative.

not to mention that college is not for everyone and can be a HUGE waste of time and money if they want to go to a trade school or do something else that doesn't require school. You don't have to have a disability to not go to college (or even not have a disability to go to college). I hate it when people say college is not an option for thier kids (it's mandatory), because yes it is an option and THEY can choose a different route. There are plenty of professions where college is not required. /endrant

JSS1002 · April 2014

Heywhitney said:
529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

Thats "what you do" in our families too but I can't handle the idea of losing any money and there are no promises in life. I imagine my kids might not always make things as easy as "it's what you do," and while I won't love that choice, I REALLY won't love it if it means my losing my hard earned and saved money.

bumpuser10199668 · April 2014

Heywhitney said:
529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

I have a masters and DH has a high school diploma. No autism, no learning disabilities. Just didn't want to go to college. I hate the assumption that there must be something "wrong" for you not to go. College is a joke now for a lot of people and is not a necessity for success

JustCricket · April 2014

Heywhitney said:

529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

also here's a great article for you to read. I bet a good chunk of these make more money than you or your SO (not that money is the best reason to go into a career field, we all know it should ideally be about what you want to do)

eta- I forgot the link

https://www.businessinsider.com/high-paying-jobs-dont-require-bachelors-degree-2013-12?op=1

bumpuser10199668 · April 2014

@Heywhitney‌ of course I want my nurse to have a degree of some sort. College is a necessity for some fields and obsolete for others

rockychryslerb2010 · April 2014

We have a 529 for the tax benefit only. We also have a separate investment account that has all of our savings (excluding 401ks). The investment account allows us to have some money in dated target funds, plus any individual stocks we are interested in. I like the flexibility of controlling our on investments, but don't always have time to do the research for where I want to put the money. Between the 529 and our other investments, I hope we can pay for most of both of our kids' college. My parents paid a good amount for us, and I came out with loan I was able to pay off in three years.

emmylu30 · April 2014

SmileyGirl18 said:

Heywhitney said:
Just to clarify, higher education does note equate to college. There are several avenues you can use 529 savings accounts for besides college whether you have a disability or not.

Also, if your child chooses to not go that avenue you don't lose your money. You are entitled to everything you put into it. Also, I like the protection 529 savings accounts give a parent. This is a savings account for education. If your child decides not to go that route than he/she isn't entitled to money, bc it's your money.

I disagree that college degrees don't mean anything. I'm a nurse and I recently had a manager tell me that the field is moving in a direction that they not be hiring anyone without a Bachelors of Nursing. They are even making some nurses go back to school that only have an Associates. I imagine that this isn't limited to healthcare.
Actually, it must be used for some form of education. Yes, that can mean options other than a traditional university, but you can't just "get it back".

My understanding on 529 is that if money is not used toward education there is a 10% penalty on earnings but you are guaranteed all the initial investment back minus any applicable taxes.

rockychryslerb2010 · April 2014

SmileyGirl18 said:

Just to clarify, higher education does note equate to college. There are several avenues you can use 529 savings accounts for besides college whether you have a disability or not. Also, if your child chooses to not go that avenue you don't lose your money. You are entitled to everything you put into it. Also, I like the protection 529 savings accounts give a parent. This is a savings account for education. If your child decides not to go that route than he/she isn't entitled to money, bc it's your money. I disagree that college degrees don't mean anything. I'm a nurse and I recently had a manager tell me that the field is moving in a direction that they not be hiring anyone without a Bachelors of Nursing. They are even making some nurses go back to school that only have an Associates. I imagine that this isn't limited to healthcare.
Actually, it must be used for some form of education. Yes, that can mean options other than a traditional university, but you can't just "get it back".

It might vary by state and plan, but I know this isn't true for the plan we're in. First, you can transfer to a sibling or any other relative. If there is no one in the family who can use the funds, you can take a 'non-qualified distribution', which means you owe taxes on the earnings and are subject to fees. While you will have to pay (similar to taking money out of an IRA early) you don't lose the money if your child or any other relative, doesn't go on to higher education.

JSS1002 · April 2014

SmileyGirl18 said:

Just to clarify, higher education does note equate to college. There are several avenues you can use 529 savings accounts for besides college whether you have a disability or not. Also, if your child chooses to not go that avenue you don't lose your money. You are entitled to everything you put into it. Also, I like the protection 529 savings accounts give a parent. This is a savings account for education. If your child decides not to go that route than he/she isn't entitled to money, bc it's your money. I disagree that college degrees don't mean anything. I'm a nurse and I recently had a manager tell me that the field is moving in a direction that they not be hiring anyone without a Bachelors of Nursing. They are even making some nurses go back to school that only have an Associates. I imagine that this isn't limited to healthcare.
Actually, it must be used for some form of education. Yes, that can mean options other than a traditional university, but you can't just "get it back".

I believe it varies by state - but isn't it also taxable if not used for education?

mrsdanielleM2010 · April 2014

carmstr4 said:

@Heywhitney‌ of course I want my nurse to have a degree of some sort. College is a necessity for some fields and obsolete for others

This, for sure.

JustCricket · April 2014

Heywhitney said:

Heywhitney said:

529 account here for DD and will do the same for this LO. In my family higher education isn't really an option. It's what you do.

also here's a great article for you to read. I bet a good chunk of these make more money than you or your SO (not that money is the best reason to go into a career field, we all know it should ideally be about what you want to do)

eta- I forgot the link
https://www.businessinsider.com/high-paying-jobs-dont-require-bachelors-degree-2013-12?op=1
I don't really take lists like this seriously. It's a median of incomes throughout the entire country. Everyone knows cost of living in an area varies widely and is reflected in your pay. My field is represented on this list and I have a Bachelors. I promise you I make more than an RN that had an ADN. Plus, the majority, if not all of these careers require some sort of training beyond a high school diploma. This is considered higher education thus proving my point. I want my kids to have every opportunity I was given. If they choose not to take it, it's ok. However I like that the protection of a 529 savings account protects a parent's assets.

idk about this. My brother and friend both graduated at the same time, in the same area. My brother got his RN with his associates and passed his nclex on the first attempt. My friend who went to one of the top schools in the area for nursing got her BSN and RN took her two attempts to pass the nclex. Guess who got a job quicker? Guess who is making more money right now... not the person with the BSN. I think it varies and to say that a nurse with a bachelors degree is better than one with an associates especially if they both passed the exam they needed and both did the clinicals needed. The only difference between them is my friend had to take a lot more non nursing electives. Bc we all know nurses don't know shit until they actually get in field experience.

Bonnesetter27 · April 2014

If my child(ren) decide not to go on to college and have a plan, then I have no problem with that. I am setting aside money if they want to go to college (which costs an arm and a leg). If my ds or this lo decides not to go then I would transfer the money to the other child or if neither wants to go that route I can save it for a nephew or even my grandchildren. This money is set aside for the high costs of college, this is not a savings account for them to have money upon graduation of high school. We have a 529 and will open another one for this lo. I also have a savings account for ds where he could (when he is older) use the money to buy whatever he wants and also save in it.

AccioPizza · April 2014

We're doing a 529 plan for our son, and will for our daughter and all our future kids. In Indiana, you receive 20 percent of what you put in back on your tax return, up to $1,000. So if you manage to put in $2,500 in a year, you are getting $500! (And my family is out of state and thus can't get the benefit, so when they want to contribute they write the check to us to put in, and we get the tax benefit.) A pretty sweet deal. They can also be transferred to other members of the family if the kid in question doesn't go to college, or even used for that child's future children. So, I don't worry too much about the "what ifs" when it comes to him potentially not using it.

rockychryslerb2010 · April 2014

SmileyGirl18 said:

SmileyGirl18 said:

Just to clarify, higher education does note equate to college. There are several avenues you can use 529 savings accounts for besides college whether you have a disability or not. Also, if your child chooses to not go that avenue you don't lose your money. You are entitled to everything you put into it. Also, I like the protection 529 savings accounts give a parent. This is a savings account for education. If your child decides not to go that route than he/she isn't entitled to money, bc it's your money. I disagree that college degrees don't mean anything. I'm a nurse and I recently had a manager tell me that the field is moving in a direction that they not be hiring anyone without a Bachelors of Nursing. They are even making some nurses go back to school that only have an Associates. I imagine that this isn't limited to healthcare.
Actually, it must be used for some form of education. Yes, that can mean options other than a traditional university, but you can't just "get it back".

It might vary by state and plan, but I know this isn't true for the plan we're in. First, you can transfer to a sibling or any other relative. If there is no one in the family who can use the funds, you can take a 'non-qualified distribution', which means you owe taxes on the earnings and are subject to fees. While you will have to pay (similar to taking money out of an IRA early) you don't lose the money if your child or any other relative, doesn't go on to higher education.
This is true. But the 10% penalty and taxation at your ordinary income level completely negate any benefits from using the plan. If you have 50k in plan, and end up not using it for educational purposes, you are looking at losing approximately $7500 (depending on you tax bracket) I don't see that as being able to get your money back. The difference between a 529 and any other retirement account is with a retirement account, the penalty is removed once you turn 59 1/2. With 529, it is always there. Not to mention if you need access to the funds for an emergency, you don't have simple access. It is a very personal choice. As I said earlier in this post, it isn't for us. We chose an a non-qualified investment account. You would probably be surprised how many people in the financial industry don't choose 529s for their own families.

I get that, I'm in the industry too and we chose to do the plan, in addition to our other investments. In the rare case my child decides not to go on to higher education, I could see us putting a rule on the money saying they can have it to use for a house or other large purchase, but they have to pay us back any fees and capital gains we have to pay.

Also agree it is a personal choice, I was simply pointing out incorrect information.

rockychryslerb2010 · April 2014

SmileyGirl18 said:

SmileyGirl18 said:

SmileyGirl18 said:

Just to clarify, higher education does note equate to college. There are several avenues you can use 529 savings accounts for besides college whether you have a disability or not. Also, if your child chooses to not go that avenue you don't lose your money. You are entitled to everything you put into it. Also, I like the protection 529 savings accounts give a parent. This is a savings account for education. If your child decides not to go that route than he/she isn't entitled to money, bc it's your money. I disagree that college degrees don't mean anything. I'm a nurse and I recently had a manager tell me that the field is moving in a direction that they not be hiring anyone without a Bachelors of Nursing. They are even making some nurses go back to school that only have an Associates. I imagine that this isn't limited to healthcare.
Actually, it must be used for some form of education. Yes, that can mean options other than a traditional university, but you can't just "get it back".

It might vary by state and plan, but I know this isn't true for the plan we're in. First, you can transfer to a sibling or any other relative. If there is no one in the family who can use the funds, you can take a 'non-qualified distribution', which means you owe taxes on the earnings and are subject to fees. While you will have to pay (similar to taking money out of an IRA early) you don't lose the money if your child or any other relative, doesn't go on to higher education.
This is true. But the 10% penalty and taxation at your ordinary income level completely negate any benefits from using the plan. If you have 50k in plan, and end up not using it for educational purposes, you are looking at losing approximately $7500 (depending on you tax bracket) I don't see that as being able to get your money back. The difference between a 529 and any other retirement account is with a retirement account, the penalty is removed once you turn 59 1/2. With 529, it is always there. Not to mention if you need access to the funds for an emergency, you don't have simple access. It is a very personal choice. As I said earlier in this post, it isn't for us. We chose an a non-qualified investment account. You would probably be surprised how many people in the financial industry don't choose 529s for their own families.

I get that, I'm in the industry too and we chose to do the plan, in addition to our other investments. In the rare case my child decides not to go on to higher education, I could see us putting a rule on the money saying they can have it to use for a house or other large purchase, but they have to pay us back any fees and capital gains we have to pay.

Also agree it is a personal choice, I was simply pointing out incorrect information.
I stand by my PP, with the penalties and tax consequences, I don't see you being able to get your money back.

That is fine, but your original comment about not being able to get your money back doesn't include all the facts. Obviously, anyone considering one of these plans should talk to a real life professional first to discuss their personal situation. For some people, a 529 is a good option, not everyone feels comfortable or wants to control investments.

mcstrepp · April 2014

carmstr4 said:

@Heywhitney‌ of course I want my nurse to have a degree of some sort. College is a necessity for some fields and obsolete for others

I have to agree with this. Certain fields it is really necessary but other fields it isn't. My DH is an electrician and did an apprenticeship through a union and is doing really well. College wasn't needed for what he wanted to do.

JSS1002 · April 2014

Nothing wrong with learning a trade if that is what you prefer to do. College isnt' for everybody, some careers don't require a degree, and quite honestly for the cost of college these days, you might be able to make better money as a tradesman.

camichael84 · April 2014

These are all great responses and have given me a lot to think about. After talking to DH, he was already interested in a 529, but wasn't aware of the penalties if LO doesn't go to college. That's a huge pitfall to both of us, as we don't want to lose our investment. Our current plan is to talk to a financial adviser to see what savings plan would best suit our wants and needs.

MMason12 · April 2014

JustCricket said:

We have a 529 set up for our kiddo. It's through our state so that we qualify for state tax deductions. It is low on our priority list, though, because I am a SAHM and have massive student loans, so we're trying to save for retirement and pay off my student loans before we pay for our kids' college .
This. We have our own college shit to pay off. Not much.. but its still there.

Although we have minimal student loan debt left, we do have our focus on saving for our retirement. Both my husband and I agree that we will not bankrupt our retirement trying to give our kids money for college. My husband paid his own way through college and I paid half of my own way. We both survived. The number one thing a good financial planner will tell you is to make sure your future is secure before you even start thinking of saving or giving kids money for college. It doesn't mean we aren't stashing some money away for our LO's future, we just aren't focused on making sure they get a "free ride" from Mom & Dad for college -- if that's what they choose to do.

Ceridwen21 · April 2014

We're in Canada and we have an RESP set up for DS, and will do the same for DD. I like that it can be used for any post-secondary education (incl. trade school) should they not decide to go to university. And if they chose no post-secondary education, they can have the principle and we only lose the interest.

We put all the money we received for baptism, birthday gifts etc into it, and also directly transfer our federal and provincial "baby bonus" checks into it. It should be enough to cover tuition (but not living expenses) when the time comes, but tuition in Canada is a fraction of what it is in the US.

whataboutscience · April 2014

We are planning on finishing payment on our mortgage by the time LO gets to college which will greatly free up our income.

courtney4425 · April 2014

@whataboutscience‌ that's our plan too. Getting the burden of debt off of our backs is our #1 priority.... It'll make things much easier for us in the long run. We prob still won't pay all of their expenses... I had to and am still paying for my college... I think my kids will appreciate their education more if they have to contribute to it as well. Just my 2 cents.

karin97 · April 2014

We have an education savings account set up. My husband transferred his GI bill to my dd this esa will be transferred to the baby

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