Finances for your children? Help/advice needed!

I have a 2 month old DD and have been meaning to start looking into financial options for her in terms of bank accounts to start saving money. I'm a member of NEFCU and saw they have a Tuition Builder account option where you can withdraw money from the account 1) with a tuition bill from a college or 2) during 2 periods of time a year considered "open withdrawal periods". My question is if I do this kind of account, is it also necessary to open up a savings account for her? I figured that any money she receives as gifts would be deposited into whatever account I opened for her. Any money I save for her is intended for college, so should I just open the college account? I assume that limiting when and why you can take money out helps people save more money versus a plain 'ole savings account which you can access whenever you want. An IRA is another option, but I don't know much about it. Regardless of the type of account I open, I'm planning on having the funds directly withdrawn from my paycheck so I don't have to remember to do it each pay period.

I'd love to hear your thoughts on the topic -- tuition college account vs. IRA vs. regular savings account?

Re: Finances for your children? Help/advice needed!

I can't tell you what you should do but I can tell you what we do. We have 529 plans for each DD, money auto deducts from paychecks. We also have a savings account for each of them. The older one also has money in a CD.

Finances for your children? Help/advice needed!

My parents and grandmother both have 529 plans for my dd. I have a bethpage youth account for her, it's 4% on the first 1k and normal rates after that. I also have a Citibank savings account where money auto deducts every paycheck. And finally I have some money in the stock market. I plan to add a bit more bc she has a while before college so I can deal with the up and down and ultimately up.

I think the best advice is to have a diversified portfolio.

Finances for your children? Help/advice needed!

My grandfather set up 2 nontaxable municipal bonds for DD (I think that's what they're called). My dad set up a 529 for her that he contributes to each month.

Finances for your children? Help/advice needed!

I dont like 529's simply bc you cannot use them for anything but schooling should you need to... I like to have access to my money at all times... We have 2 Roth IRA's set up in each of our names... One acct for us... One for my dd... You can contribute $5500 towards each acct every year and can take out contributions at any time without penalty...

Finances for your children? Help/advice needed!

We have the dogdays (or whatever it is called) for children with NEFCU and 2 529's. I wouldn't stick with just the tuition builder if you can afford a 529. we tried to work with nefcu but things got messed up so we just opened with vanguard, and my grandfather opened another one for him separately.

Re: Finances for your children? Help/advice needed!

Re: Finances for your children? Help/advice needed!

Message edited 7/9/2015 2:25:11 PM.

Re: Finances for your children? Help/advice needed!

Re: Finances for your children? Help/advice needed!

I am not a fan of the 529 either. Nj gives no tax benefits so it is just not as attractive to me. I don't like that you can't use it for anything you want and let's get real here, my investments are for my immediate family. I might give a small gift to a hypothetical niece or nephew but not my kids entire college fund. None of my siblings have children and we have no cousins, so for us, it is not really a good option.

You can save in a Roth IRA in your name. Utma which will become your child's account when they turn 18, CDs, bonds (no good interest rates right now), Coverdale accounts, brokerage accounts.

Finances for your children? Help/advice needed!

General savings and 529s for each kid.

The nys 529 is well ran (with very low expenses) and you get a tax deduction. If in the rare circstance both my children don't go to college DH or I will get a phd :)

Finances for your children? Help/advice needed!

We have savings accounts where we put their gift money into as well as a 529 for each kid.

As far as saving for college NYs' 529s rock. THey use the same vanguard mutual funds that have low fees (they rename them in the 529 but you can figure out which mutual fund it is). Also, they have an auto "set it and forget" option where you say how old your kid is and how aggressive you want to invest and over time it shifts the account towards a more conservative portfolio as the kid gets older. Also, the contributions are state tax deductible and there is no tax on the growth when it's withdrawn for educational purposes.

Someone commented on concerns about not having the money "handy" if it's in s a 529 should there be an emergency. Classic personal finance advice places college savings as the LAST thing you do after:
1. getting an emergency fund of 3-6months
2. paying off unscured high interest (i.e. credit card) debt
3. fully funding your own retirement

So if you're worried about having money for a rainy day you should fund your EF FIRST before even thinking about a college fund. Also, you should make sure you don't have any credit card debt. Even if you make 10% on your investments, if you lose 16% in your credit card interest you're at a loss.

Also, I'd add that you can withdraw from a 529 for noneducational purposes. You just need to pay the taxes AND a 10% (I think) penalty. If you google it there's actually a strategy for high net worth folks to invest in 529s for retirement since you'll make out more on the tax deferral than you will lose on the 10% (it seems a little wishy washy but some people have done the math).

Finally, as someone said 529s are transferable between kids or even if your kids dont' fully use it you can save it for their kids.

Message edited 7/9/2015 9:06:18 PM.