None of us are financial advisors so DO YOUR OWN RESEARCH and talk to a financial advisor about what makes sense for you. A general rule of thumb is that you should be contributing to your retirement BEFORE funding for your child's education, but even if you can't start saving now, others can contribute to your child's 529 if you set it up.
What is a 529 plan? (source: https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html)
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
There are two types of 529 plans: prepaid tuition plans and education savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a prepaid tuition plan.
Education Savings Plans. Education savings plans let a saver open an investment account to save for the beneficiary’s future qualified higher education expenses – tuition, mandatory fees and room and board. Withdrawals from education savings plan accounts can generally be used at any college or university, including sometimes at non-U.S. colleges and universities. Education savings plans can also be used to pay up to $10,000 per year per beneficiary for tuition at any public, private or religious elementary or secondary school.
A saver may typically choose among a range of investment portfolio options, which often include various mutual fund and exchange-traded fund (ETF) portfolios and a principal-protected bank product. These portfolios also may include static fund portfolios and age-based portfolios (sometimes called target-date portfolios). Typically age-based portfolios automatically shift toward more conservative investments as the beneficiary gets closer to college age. If you are using a 529 account to pay for elementary or secondary school tuition, you may have a shorter time horizon for your money to grow. You also may not feel comfortable taking on riskier or more volatile investments if you plan on withdrawing the money soon. Because of these things, you may consider different investment options depending on when you plan to use the money that is invested.
All education savings plans are sponsored by state governments, but only a few have residency requirements for the saver and/or beneficiary. State governments do not guarantee investments in education savings plans. Education savings plan investments in mutual funds and ETFs are not federally guaranteed, but investments in some principal-protected bank products may be insured by the FDIC. As with most investments, investments in education savings plans may not make any money and could lose some or all of the money invested.
Re: 529s (Saving for your child's education)
I posted this in another thread, but I think it's useful enough to re-share. It helps to identify which 529 plan might suit you best, depending on which state you live in.
https://clark.com/education/clarks-529-plan-guide/
Also not advocating for this either way, but I know some people are fans of using a Roth IRA as a college savings vehicle. It's more flexible if your kid doesn't end up going to college, but contributions can still be withdrawn tax-free. Here's an article on that https://www.cnbc.com/2014/02/03/roth-iras-can-be-a-better-way-to-save-pay-for-higher-education-costs.html.
BFP: 8/20/2018 - EDD 5/4/2019
DH did some research and although we live in CA, we chose Nevada for DD's plan after looking at various info and return rates. I've also heard people like Utah's. Don't necessarily consider those an endorsement as we set it up over a year ago but just calling out to do your research. Any financial institution you chose to get one through will be associated with a particular state's plan.
This LO will be Illinois Bright Start from Day 1.
BFP: 8/20/2018 - EDD 5/4/2019
BFP: 8/20/2018 - EDD 5/4/2019
BFP: 8/20/2018 - EDD 5/4/2019
https://money.usnews.com/money/personal-finance/mutual-funds/articles/2014/08/07/should-your-529-plan-be-direct-sold-or-advisor-sold
ETA My bigger issue is the fact that these funds are down 20% in 2018 when the general stock market is only down 6% (and the state's plan down 5%). I know that the idea is to not be conservative when you have 18 years to go in the investment, but my 401k is not at all conservative and it's only down 6% this year.
Neither H nor I studied abroad but I'm all about my kids doing it for a semester or two or doing it for their entire higher ed careers. I'd seriously love if my kids wanted to stay near home for school but would also love if I had fun places to visit!
They have similar deals in different states.
DD: 8/20/14; DS: 11/13/16; DD: 5/3/19; DD: 8/31/21; Baby #5 (team green) due 3/24/24