Saving for the Kids College: What's the Best Way?
Credit: paul_everett82
Remember the day you brought home your new child and thought, “This is the BEST day, ever! I am going to love being a parent,” then the baby pooped, at which point you realized that this precious child is going to be nothing but hard, stinky work and is going to be the costliest decision you’ve ever made?
Yeah. Fond memories.
Of course, I am not saying that children are nothing but expensive accessories in your life, but one day, you’ll realize that you want to send your child off to college to gain themselves a fine education, because clearly, after all those diaper changes, that kid owes you. BIG TIME.
So, where do you start? I figured that I was a pretty smart, so I decided to google my little fingers off and see just how easy it is to save money for my children’s education. What I discovered is that not only do I not know Where’s Waldo, I also don’t know diddley about choosing the right plan for my kids’ college fund.
I decided that clearly I needed help, so I asked a whole bunch of smart people, who actually have degrees in this field, and here’s what I discovered:
529’s are not for everyone - These plans are all about tax-free growth. So if you’ve just had a baby,excellent. If your child is 13, not a lot of moola is going to accumulate in the next 5 years. If you are a making a high income and not even in the running for financial aid, then why are you reading this… go ask your accountant already. Kidding! Author Tim Higgins from CollegePlusRetirement.com suggests that 529’s are a great way to reduce taxes on your savings, as well as a great place for grandparents who would like to help with their grandchildren’s college expenses. They can control all the money and can gift large amounts out of their estate.
Given the recent decline in most people’s 529 accounts, many parents are questioning even keeping their money in a 529. “What many need to look at now is how well their plan provider managed the downturn. Just going with your state’s plan may not be the right thing to do going forward, if your manager took on more risk than was appropriate, or doesn’t offer save options, like money market accounts.” says Robert Schmansky, CFP.
by tomsaint11
Think creatively – Roth IRAs are a good choice as you can pull out the principal after five years with no penalty for educational purposes. If your child does not attend college, then your money will continue to grow for your retirement.
Manuel Fabriquer, a Certified College Planner from College Planning ABC, says “If the parents do not want to risk losing principle, a CD account is going to give peace of mind in this economy. The rates are low and the accounts are FDIC insured now to $250,000. It’s not fancy but it will work for now until the economy gets back on its feet.” Which as we all know is going to be next week. Right? Wrong.
With all the time you are on the internet, why not use Freshman Fund as an innovative way to save for college? All it takes is an email address, two minutes and grandparents, aunts and that lady that lives down the street (who makes those fabulous cookies), can easily and quickly deposit money into your child’s 529 account.
Wait! Not easy enough? How about using your everyday checking account to help save for college? FutureTrust Banking Center’s 529 checking accounts earn a minimum of 1 percent interest on their average daily account balance. That generated interest is automatically deposited into a college savings plan of the account holder’s choice. Suh-weeet! Anything that I don’t have to get up off the couch to do is all right with me!
Saving, schmaving – If saving is not an option for your family right now, as it is for many of us, don’t forget that school scholarships, grants and financial aid are all worth looking into for your child’s education. Instill in your kids now the importance of good study habits and a great GPA and it will pay off come college application time. There is no need to forgo your own retirement for your kid’s education. If all you can afford is putting some money away for retirement, then pay yourself first. The government doesn’t offer financial aid for road trips to visit your grandchildren.
As always, you can sign up for a free Quicken Online account to keep tabs on your investments. It won’t cost you a cent and you’ll be happy to see if your money is growing enough to send junior to his favorite school.
If not, there’s always living with Mom and Dad. Oh snap! Did I say that?
Tags: 529 plans, College savings | Categories: Investing, Saving |
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