Let's talk college savings

kns1988 · February 2017

This seems like a topic that could be detailed enough for it's own thread. Is anyone opening a 529 college savings plan when their kid is born or already have them for existing kids? What's your strategy for saving for college?

kns1988 · February 2017

I live in PA, and PA gives you a tax deduction for a plan in any state, so I don't have to go with the PA one. I opened a Utah 529 for my niece when she was born 4 years ago to help pay for books and things because at the time it had the best returns. It's still listed as the top performing if you look at the past 10 years, but it seems to be falling off the top 10 list within the past few years.

I'm trying to decide if I should just go with PA for my son, which has only been in the top 10 list for the past 3 years, because tax law could always change and they might start only giving deductions for the in state plan. I'm not expecting anyone to make the decision for me here; just talking it out and wanting to see what others have done.

I paid for my own education (still paying it back), but I'd like to pay for my children's up to a certain point. If they pick a crazy expensive school, they'll be covering the difference.

SKZW · February 2017

Good topic. I'll be doing the same re: crazy expensive school, I'm not paying for the whole shebang. My son is 3 and he has a 529 plan that we add to regularly (and should be a nice chunk of change in 15 years). Good idea to ensure it can be applied to a school in any state. From what I remember, we had to be careful with 2 other things: (1) to pick a plan that allowed for the money to be spent on "education-related" items, so it wasn't required to be spent on tuition alone, and (2) to set it up/list the name in such a way so that the money could be his OR ours (in case he decided not to go to college, which is always a possibility). Make sure to protect the investment and be able to receive it back if needed.

A reminder to start taking care of all the other important docs now that a LO is on the way: will, trust, life insurance beneficiary... easier to get the process rolling ahead of time and make all the decisions so all you have to do is add the legal name and finalize the paperwork. This can be $800 or $1000 and up, so it's good to budget for it as part of the overall "first-year" expenses.

bacorrea · February 2017

DH is military so each kid will get 2 years college paid for. After that I'm not sure. We have a lot of debt and need to be contributing to our retirement. We aren't able to start a college plan right now. I do hope when the time comes we can help them out, but we will see.

chickyclg · February 2017

Ugh this is something I need to set up, we currently just have a direct deposit going into a savings account though. We are in TX and the kids will be told the same thing we were "We will pay for any school you want to go to.... in Tx". If they are dead set on going to school out of state they will need to contribute.

pshaortao · February 2017

We set up a 529 account for DD. Our biggest concern was it for college only, what if one of the two kids end up not going to college for whatever reason? Its our understanding that we can have just one account and transfer/split the amount if needed between the two kids. We will wait until later this year after this kiddo is born and discuss it with our financial advisor.

For those with more than one or planning on more, I would check into this!

starphish18 · February 2017

We also need to set this up, along with a will, etc. My husband works at a university (and plans on staying there). So, if our kid does end up going there, most of the tuition would be covered. But, we can't assume that will be the case, so we definitely want to get a fund going in case. @SKZW Those are some helpful tips to keep in mind, thanks.

inomniaparatus2 · February 2017

We already set one up for this LO. We started early because of the tax breaks. My DH is in charge of all the finances so he researched the different plans in different states. Each state is different and you can go with whichever one you want. DH went to college and med school in Egypt where if you score high enough, your schooling is free so he has no college loans. I on the other hand had to pay for my degrees so I took out loans. We both believe in supporting our kids through school so we've come up with a certain amount each year that will be put into the 529. DH also increased his life insurance amount.

We have started talking about our will, beneficiaries and trust but haven't done those yet.

kns1988 · February 2017

Good reminder to get on the will thing. I've been meaning to do that, but it's so low on my priority list right now even though I know it's important. I should also consider increasing my life insurance because I'm the breadwinner in the family.

mamatowildones · February 2017

We have accounts for both kids set up. It's my parents gift to us for each baby. It's fun to watch the money make money and know that by the time they needs it we will have that for them.
As far as our plan goes, we will be doing what my sister did for her kids. Give them what's been saved but they are responsible for the rest. My amazing niece put herself through a state school with no debt upon graduating and just bought her first car. Amazing and rare I know, but my sister and hubs did something right for sure with their four awesome kids. Hoping to follow in their footsteps.

saric83 · February 2017

pshaortao said:

We set up a 529 account for DD. Our biggest concern was it for college only, what if one of the two kids end up not going to college for whatever reason? Its our understanding that we can have just one account and transfer/split the amount if needed between the two kids. We will wait until later this year after this kiddo is born and discuss it with our financial advisor.

For those with more than one or planning on more, I would check into this!

This is exactly our concern. One set of grandparents set up a 529 for our 20-month old, but we are setting aside money in a whole-life insurance policy and deferred savings account. We're just not super comfortable putting aside a lot of money that we may never end up using if our kiddos decide to go a trade route or whatever.

bubsalicious · February 2017

@mamatowildones what type of accounts do you have set up?
I've never heard of a 529 until now. Is this something that you have to put money into every month? Also, if both parents are on it, do both have to put money in every month? The little bit of research I did on it kept talking about single and married incomes.

kns1988 · February 2017

absbubbs said:

@mamatowildones what type of accounts do you have set up?
I've never heard of a 529 until now. Is this something that you have to put money into every month? Also, if both parents are on it, do both have to put money in every month? The little bit of research I did on it kept talking about single and married incomes.

I'm not an expert, but I do have a 529 for my niece. You don't have to contribute a set amount to it and there's no required schedule to contributions. You can just put money in as you see fit, but a lot of people will make it part of their monthly expenses.

From my research, 529s can usually only be used for college expenses (tuition, books, housing, etc), so you can't withdraw the money for other reasons. You can typically transfer the account to another person if the person initially on the account decides not to go to school - so if my niece decided not to go to school, I couldn't just give her the cash, but I could transfer the fund to my child or myself and use it for some form of higher education. They have a decent rate of return and you can get tax breaks for them, which makes them a preferred method of saving for college.

*disclaimer: I suppose every plan could have slightly different rules, so you'd want to do more research on the plan you're interested in. My experience is with the Utah plan.

kat81 · February 2017

Maybe this is a FFFC (or FFSC given the date) but YES we have these for both kids and have been great about putting money into them. However, with the third on the way and DH's employment situation a bit up in the air (plus he's going to take some unpaid leave), we are going to stop putting money into these (which means none for #3), at least for a little while. I could see us taking more than a year "off" from contributing money, to wait until DD is in kindergarten in 1.5 years. And it does depend on what job DH gets and how quickly he gets it when we'll be contributing. So...sorry 3rd kid, no money for you! Except not really because you're allowed to transfer money between them later on, and I'm sure we'll play catch-up at a later time. Also we did do a great job contributing to the other two so far, so we're in good shape.

MrsCPALeslie · February 2017

My husband and I will start a college savings account for baby girl as soon as we get settled in the house. We will definitely not put our money in an account that is restricted just for school expenses because you can't control what happens. What if your kid doesn't go to college or what If they get a full ride to college. We will be looking for something more flexible.

achays11 · February 2017

We currently have an ING savings account for DD that we put money into every month. I like having just a regular savings account because we can take money out whenever we need it and it isn't just for school expenses. My mom will do the same thing for all of her grand kids. And my grandma has set aside some money for my kids.

BeachMommy2B · February 2017

I've been looking into the FL prepaid. Its awesome in the long run, but is pricy month to month. To start DD who's 3 and baby boy when he comes we would have to pay $400 a month for the next 18 years

hp_momma · February 2017

@BeachMommy2B Yikes! That is pricey month to month.

We actually have been really bad about saving for college but it's on our list of goals for this year. We have always agreed that we would pay for our kids to go to an in-state college and have hopes for some scholarship money for academics/sports!

@bacorrea what am I missing about this military kids two years covered?! I figured there were probably private military kid scholarships out there but is there an actual program?

JCWhitey · February 2017

We were going to do this, but after talking it over my husband said he always thought he'd be better off not going to college and going to trade school instead, but the pressure from his parents was intense. I actually got an almost full ride to college with scholarships and went to community college so I was able to leave school with no debt (in fact, the Pell Grant was more than I spent on school so I ended up not having to work while goin).

So this may be an unpopular opinion, but between our two experiences we've decided that if our kids want to go to college they will find the means and the way. And if they don't we are both firm believers that not everyone should go to college and we will support them in whatever path they choose... as long as it's not drug dealing or something like that.

bacorrea · February 2017

@hp_momma oh no. DH is going to transfer them his GI Bill. We both have our MAs so we don't need it. DH old commander has 4 kids and said there is a way to give each kid one year. Just going off of that info we plan to give DD and DS two years each. It does add 5yrs to your contract to transfer (I think - it could be 3) once DS is born DH is going to fill out the paperwork. Especially since that basically covers his service time until it's time to make major anyway. So why not go ahead since he is in anyway. @WombThereItIs may have more accurate information than I do.

hp_momma · February 2017

bacorrea said:

@hp_momma oh no. DH is going to transfer them his GI Bill. We both have our MAs so we don't need it. DH old commander has 4 kids and said there is a way to give each kid one year. Just going off of that info we plan to give DD and DS two years each. It does add 5yrs to your contract to transfer (I think - it could be 3) once DS is born DH is going to fill out the paperwork. Especially since that basically covers his service time until it's time to make major anyway. So why not go ahead since he is in anyway. @WombThereItIs may have more accurate information than I do.

Ahhhh. Makes total sense now. DH used his GI Bill for his college. Which looking back on it, it would have made so much more sense for him to do the Green to Gold program instead so we could have saved the GI Bill for kids, but at that time we thought he was done with the military (until it sucked us back in lol).

jayandaplus · February 2017

We're planning to open a 529. My grandparents and parents started a fund (I don't think it was a 529 at the time) for my sister and I when we were babies and it really helped. I will be paying for my education for a while, because I didn't do things the best I could have (no regrets!), but am so grateful I had help from my parents. I'm also in the camp that college is not always best, and I wish that had been an option for me personally (it wasn't really, which I think burned me more in the end.) So maybe one 529 and see who needs it when the kids are older, especially if it can be split.

Anyone know how long a 529 is good for? As in, if the kid doesn't go to college right away, but at 30 or 40 decides to get a higher education can they still use it then?

As for wills, anyone have more information on what they're doing specifically? Like, do you have a lawyer and notarized documents? Or do you just have beneficiaries for all of your assets?

JCWhitey · February 2017

@jayandaplus We have a lawyer in the family so they did our will for free and will act as our executor should something happen to us. I'm not sure if this is something you really need but it's nice to have. Might be expensive, though. I'd say it depends on how complicated your will is (I.e. How many people are in it, how many assets you have, etc.). Ours is pretty simple. Everything goes to the family who would get custody of the kids except our stocks which my FIL would manage for the kids when they turn 25. So, really just two people are in it and the big thing is custody of the kids. If you're not sure what you want to do I'd at least look into Legal Zoom or something.

Funny side story, I found my parents will that give custody of my brother and I to our aunt and uncle. Obviously, they need to update it. But I joke with my aunt that if anything happens to my parents I'm moving in with her.

pshaortao · February 2017

@jayandaplus No idea if a 529 account has a limited life but thats a good question!

As for the will, this is something we have not done yet (oops) but I know some moms in my last BMB used legalzoom.com to create their wills online for free. Something to check out.

mamatowildones · February 2017

@absbubbs it's a 529 college fund. My parents opened it for them for them but it doesn't have their names at all. It was just something that they wanted to start for us and put initial funds in. we get a monthly statement but we do not put money in there monthly. Usually a few times a year. ALso, DH always puts loose change in their piggy banks and in three years there was almost $200 in there! So into the savings fund it goes.

MrsFreeman2010 · February 2017

So much I need to do! We've talked about a savings account but haven't started one for DD and we need to (she just turned). I would like to do a savings account similar to @achays11 that we can withdraw from or use for whatever if we need to.

If it's not too personal of a question, how much are you ladies contributing monthly? I'm working on a budget (for the first time ever...FFC?) and I want to add it as a line so we can plan for it

achays11 · February 2017

@MrsFreeman2010 we contribute $100 a month, and then any monetary gifts that DD has gotten. She has a nice little chunk of change for being just about to turn 3.

Cubslove12 · February 2017

What if you set up a 529, let's say you save 30,000. Your kid ends up in a trade and only needs 10,000.... what happens for the remaining money? Is there another savings option where they could take that money and put it towards a house...

JCWhitey · February 2017

Cubslove12 said:

What if you set up a 529, let's say you save 30,000. Your kid ends up in a trade and only needs 10,000.... what happens for the remaining money? Is there another savings option where they could take that money and put it towards a house...

My limited understanding is that it can be transferred and possibly withdrawn by the creator but you pay taxes on it. I can't be 100% sure, though. But it's the reason my husband gave for being strongly opposed to them.

kat81 · February 2017

JCWhitey said:

Cubslove12 said:

What if you set up a 529, let's say you save 30,000. Your kid ends up in a trade and only needs 10,000.... what happens for the remaining money? Is there another savings option where they could take that money and put it towards a house...

My limited understanding is that it can be transferred and possibly withdrawn by the creator but you pay taxes on it. I can't be 100% sure, though. But it's the reason my husband gave for being strongly opposed to them.

You can transfer it to another 529 without paying taxes. For example, if you have two kids and each has 30K in their account but one of them only needs 10K, the other kid can have 50K in his/her account to go to a more expensive school.

SKZW · February 2017

@kat81: I nearly spit out my water... if I ever have 2 kids with $60k to their names, piggies will have wings, Jolly ol' St Nick will literally visit our house in December, and hell will host the Winter Olympics, all simultaneously.

kat81 · February 2017

SKZW said:

@kat81: I nearly spit out my water... if I ever have 2 kids with $60k to their names, piggies will have wings, Jolly ol' St Nick will literally visit our house in December, and hell will host the Winter Olympics, all simultaneously.

haha, I was just going off of the example from @JCWhitey in which one kid had 30K but only needed 10K for trade school. I'm sure the most many of us can hope for is to cover a year or so of college. It's expensive! But providing some funds can also provide your kid with some choice, which is nice. Because of my job, my kids can go to my school free if they're admitted. I'd like them to have more choices, though, so we still have the 529 plans. Maybe one kid will go to my school, another somewhere else, and another nowhere at all. I doubt we're going to end up saving TOO much given how pricey education is.

CarmCeG · February 2017

SO & I started putting $5 a week in a box (for now) since finding out we were expecting. We've looked into college savings accounts and I'm only concerned about LO not being able to use it for anything other than college. We've thought about talking to our financial advisor about CD ladders.

I was not aware that there are tax deductions until I read some of your comments. This thread is very helpful. I will definitely keep doing my research.

I plan to contribute the money LO receives for birthdays and holidays. We plan to contribute $10 a week up until LO is about 5 and keep adjusting budget every 5 years. I believe as long as we can help LO with anything is fine.