College Fund/ Savings Account for LO

nolemomma14 · October 2014

The grandparents have mentioned to DH and me that they would like to help start a college fund for LO as a Christmas gift this year. I think it's great, but I'm not sure what type of account might be best for this.

We have FL prepaid here, which is great unless LO ends up going out of state. He also could decide he wants to go to a trade school, or something along those lines.

Has anyone started any type of account for LO? I'm thinking maybe a savings account would work just fine, just want to see what other options are out there.

Soon2BMrsN · October 2014

Our kids have savings accounts, 529s, and a brokerage account that will eventually be put in trust. But just a regular account will work - make sure it's in your name, though.

Nichole8787 · October 2014

We have a 529 set up that we get money auto transferred to every month and u promise linked to it

jnnfrrose6 · October 2014

Both kids have traditional savings accounts. We'll open brokerage accounts at some point as well for them. My parents did that for my brother and I and it helped pay for study abroad programs and other things growing up . Eventually, mine paid for the down payment on our house. I want to be able to provide that opportunity for my kids as well.

[Deleted User] · October 2014

If you work with a financial advisor start there. Depending on how much they want to put in, a Coverdell ESA may be worthwhile as it can be used for secondary and post secondary education expenses and covers more things than a 529. You also may benefit more tax wise with a Coverdell if you're in a non income tax state than a 529 but the contribution limits are much lower than a 529. You could also do both :-)

shortstack930 · October 2014

We set up a life insurance policy for her that she can cash in for college money or use it for whatever career she decides to go into. We pay per month for it and can add extra funds at any time.

bewilderingstar · October 2014

My hubs had a financial planner come to our house when L was 6wks old. I was so pissed and overwhelmed. I didn't have the mental capacity to think about his collegiate future and honestly I still don't.

But to answer the question, we are doing a 529 through mutual funds.

Trolson7 · October 2014

Life insurance is the way to go these days. With a 529 you get taxed when you take the money out with life insurance you don't get taxed because you are taxed on the money before it goes in. I would rather pay current income taxes on my money than have to pay whatever the taxes will be in the future!! For anyone interested here is a link about using life insurance to fund a college education...
https://img.anicoweb.com/cs/groups/public/@anpub/@img/@content/documents/webcontent/funding_edu_needs.pdf?WT.mc_id=IMGE49PXI32

hrgwu2006 · October 2014

Our 529 contributions go in after taxes. We will only get taxed on the interest accrued. Like a Roth IRA.

[Deleted User] · October 2014

529s accrue tax free and are tax free at withdrawl time if the funds are used appropriately. As always, I am not a licensed tax professional so in the end I would suggest you check with one but the whole idea of a 529 is to be a tax shelter.

nolemomma14 · October 2014

Thank you for all of the feedback. It's been very helpful!!

mamaloaf · October 2014

Trolson7 said:
Life insurance is the way to go these days. With a 529 you get taxed when you take the money out with life insurance you don't get taxed because you are taxed on the money before it goes in. I would rather pay current income taxes on my money than have to pay whatever the taxes will be in the future!! For anyone interested here is a link about using life insurance to fund a college education...
https://img.anicoweb.com/cs/groups/public/@anpub/@img/@content/documents/webcontent/funding_edu_needs.pdf?WT.mc_id=IMGE49PXI32

I have so many issues with this garbage. You go ahead and pay your 5% load and fees and I'll keep my 5% and let that compound in my kids 529. And take my state income tax deduction.

melissaquinn106 · October 2014

When I went to set something up for LO the man at the bank told me that a typical savings account was better because when they go to apply for financial aid for college they won't qualify if they have a 529 but a savings account is fine. He said he use to work for a financial aid company and that he had seen it happen many times. I wasn't in the mood to be asking questions but he seemed to know what he was talking about so I just opened a custodial savings account for her. I figured so long as I was saving money for her that was all that mattered and I could always look into more options at a later date.

mamaloaf · October 2014

mimiq106 said:
When I went to set something up for LO the man at the bank told me that a typical savings account was better because when they go to apply for financial aid for college they won't qualify if they have a 529 but a savings account is fine. He said he use to work for a financial aid company and that he had seen it happen many times. I wasn't in the mood to be asking questions but he seemed to know what he was talking about so I just opened a custodial savings account for her. I figured so long as I was saving money for her that was all that mattered and I could always look into more options at a later date.

529 plans should be in parent name, not child. The assets are considered patental property and have minimal impact on financial aid eligibility. A custodial account will become your childs property when he/she reaches the age of majority, so I hope you trust your child to spend her money on collge and nothing else!

emy730 · October 2014

We set up a 529 for DD, and we have an option for grandparents and anyone else to contribute directly to it if they want.

[Deleted User] · October 2014

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mamaloaf · October 2014

anightattheopera said:

mamaloaf said:

When I went to set something up for LO the man at the bank told me that a typical savings account was better because when they go to apply for financial aid for college they won't qualify if they have a 529 but a savings account is fine. He said he use to work for a financial aid company and that he had seen it happen many times. I wasn't in the mood to be asking questions but he seemed to know what he was talking about so I just opened a custodial savings account for her. I figured so long as I was saving money for her that was all that mattered and I could always look into more options at a later date.
529 plans should be in parent name, not child. The assets are considered patental property and have minimal impact on financial aid eligibility. A custodial account will become your childs property when he/she reaches the age of majority, so I hope you trust your child to spend her money on collge and nothing else!

A custodial account does not automatically become their property. I had to get my mom to release it when I was 18. I think it depends on you bank/CU

Ummm, you are mistaken. Perhaps your state didn't transfer the money automatically (which happens most often), but when you have a UTMA account, the money becomes the child's property at age of majority.

[Deleted User] · October 2014

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