college savings?

What's the best way to save money to give DCs at a later date?

I was looking at the 529 plan but it seems that's only usable for college ... what if DS doesn't want to go to college?

Somebody suggested getting a life insurance plan - she said that usually, you can get money out of that at a certain age and the money can then be used however DS would like. I dunno - that sounds strange to me - anyone have any knowledge about this?

Or are there other ideas for good savings plans?

What's the benefit to each one? I'm really not very knowledgeable when it comes to these things.

TIA

Re: college savings?

the 529 is usable for anything... if your child decides not go to college, its still your money. The only difference is you will have to pay taxes on it.
It is tax free if DC uses it for college. We did the 529 plan. Its a tax deduction every year. For me it was important to have this plan started ASAPIts so easy, I started it online.

Re: college savings?

With the 529 it can be used for any college for siblings or for you or DH even.

So if one DC doesn't go to college it can be used for another DC.

Re: college savings?

In addition to the 529, we opened a UTMA which is a custodial account that you manage the investments in - like mutual funds, etc. if DS doesn't go to college he still gets the $. I opened the account through Fidelity.

college savings?

I'm not very knowledgeable either. We have an ING account for DS b/c it has high interest.

college savings?

My FIL puts money into Exxon mobile stocks for the grandchildren. It has done very well in the past so I am okay with this route.

As for us, I am more cautious and just have an ING savings acct for dd that we put her bday/Xmas money in and automatically transfer a certain amt into every month.

Hopefully all of this will pay for college and a wedding someday I can only imagine how much all this will cost by that time

Re: college savings?

For now, we have a regular bank account that gets a nice part of my check direct deposited.

Eventually, we will take part of it and put it in a money market.

Re: college savings?

You can also open a youth account at bethpage. First 1k gets 4p interest. Technically you can have one in your name, one in DH, one or two in a grandparents and the 1k gets the 4p interest and anything over 1k gets regular rate.

Re: college savings?

You can automatically have money taken from your paycheck to put into an account for your DC or just as a rainy day fund. A utma (owned by DC at 18) will be looked at by colleges and will reduce the amount of financial aid they qualify for. Also once they are 18 the money is theirs to do with as they please. You could create a sub-account from your own account and just transfer money into it automatically (you own the account and control it, you can decide to spend the money on anything). It can be a brokerage account, savings account, money market etc. This is not a tax preferred account. There is a 529 account and some states do give it tax preferred status. It must be used for certain qualified education related expenses and is transferable between people.

We did not choose to have a 529 because NJ does not give it any tax preferential treatment so the benefit is just not there for us.

Re: college savings?

We have a regular savings for them, and if needed will use one of our IRA's to fund college costs. I don't want any assets in dc's name. Basically no claim to the $ until we hand it over. To be used for college or start up for a business. Wedding and house down payment is all on them.

Re: college savings?

My financial advisor strongly recommends finding other modes of investment outside of a 529 plan. He said they are not a good investment and you're better off putting your money into other things that will not only garner more interest long term but that will also allow you to withdraw the money as needed and to be used for purposes other than education WITHOUT having to worry about being penalized and taxed. He feels that handing over your money to the state to manage is a terrible mistake so we ended up pulling our money from the 529 plan.

We have set up other investments with him that are allowing us to save for ANYTHING that we need money for over the coming years.........college, our DD's wedding, vacations, really whatever we want. And we don't have to worry about taxes, fees, and being penalized for wanting to access our own money. I would advise speaking with someone to find out what the best investment is for your needs and family.

ETA - We have set up life insurance plans for both DH and I that are also investment vehicles. The money (which is quite significant, especially depending on how you set up your policy) is accessible at any time, earns a great return, and it not subject to ANY taxes or fees.

Message edited 2/2/2013 6:46:02 PM.

Re: college savings?

We have a 529 plan for each child. Yes, there is the risk that one child will not attend college, but we are hoping at least one will and the funds are easily transferable.

Our 529 plan is managed by Vanguard, the states themselves do not manage them.

DD's 529 plan has a 1yr rate of return of 16.84% and a 3-yr rate of return of 14.53%.

DS's 529 plan has a 1yr rate of return of 17.26%.

Message edited 2/2/2013 8:30:16 PM.

Re: college savings?

Most financial advisors are not fan of 529's, quite frankly, because they can not make any money off of them. You can go on-line right now and set up a 529 plan by yourself.

Of course they would much rather see you in an investment that is commission-based.

Re: college savings?

Re: college savings?

college savings?

Hofstra, I would suggest having a consult with another financial advisor. One that comes highly recommended. You are getting poor advice (and fwiw, I have two finance degrees). Life insurance policies are usually poor investment vehicles and advisors make a TON off these. And my returns on the 529 are on par with my investment account I manage on my own. Above posters are correct they Re not managed by the state but rather vanguard and you choose how to allocate the funds

Message edited 2/3/2013 7:32:30 AM.

Re: college savings?

Message edited 2/3/2013 11:50:52 AM.

Re: college savings?

Re: college savings?

Posted by Hofstra26

Posted by Karen

Most financial advisors are not fan of 529's, quite frankly, because they can not make any money off of them. You can go on-line right now and set up a 529 plan by yourself.

Of course they would much rather see you in an investment that is commission-based.

I agree a financial advisor wants to make money buuuuuuuut there are so many other investment options out there worth looking into as well that can garner you a great return on your investments.

For us, even when I opened the 529 on my own, I didn't like that you couldn't touch the money once it was invested, it HAD to be used for education expenses, and if I withdrew for anything else it would be taxed and I would be penalized. I wasn't surprised to hear the same concerns from my financial guy. I had already considered that down side to the 529 when I opened it. Ultimately, I just much preferred having an investment where I had full access to my money when I want it and for what I want it for............just in case.

I am not criticizing anyone who uses them, I just felt it didn't fit our needs.

Message edited 2/3/2013 9:14:24 AM.

Re: college savings?

I have 529 plans set up for each of our boys. We have regular contributions to it each month, and all baptism and birthday money goes in there as well. The rate of return is pretty good so far. We like the tax benefits, too.

If neither of my boys pursues college or trade school, I will use it to further my education later in life- was thinking of doing that anyway!


We met with a planner who tried to steer us away from the 529, he said similar things to what Hofstra's said. However, we want an account that is not to be touched anyway. We already have separate accounts for other situations: emergency fund, vacation fund, home repairs/improvements, and our two retirement accounts. We wanted something specific to education that is not to be used for any other purpose.

Re: college savings?

Posted by Karen

Posted by Hofstra26

Posted by Karen

Most financial advisors are not fan of 529's, quite frankly, because they can not make any money off of them. You can go on-line right now and set up a 529 plan by yourself.

Of course they would much rather see you in an investment that is commission-based.

I agree a financial advisor wants to make money buuuuuuuut there are so many other investment options out there worth looking into as well that can garner you a great return on your investments.

For us, even when I opened the 529 on my own, I didn't like that you couldn't touch the money once it was invested, it HAD to be used for education expenses, and if I withdrew for anything else it would be taxed and I would be penalized. I wasn't surprised to hear the same concerns from my financial guy. I had already considered that down side to the 529 when I opened it. Ultimately, I just much preferred having an investment where I had full access to my money when I want it and for what I want it for............just in case.

I am not criticizing anyone who uses them, I just felt it didn't fit our needs.

The whole point of a 529 is setting aside funds for college/trade school - so the argument that you can't touch it for anything else is irrelevant to me. I don't want to touch it, that is the whole point!! The odds of neither of my children attending college/trade school is slim, so I am quite happy letting that money grow untouched.

ETA: No other investment we hold (401k, IRA) is coming near the rate of return the 529 plans are.

Re: college savings?

Posted by MaZz

Posted by Karen

Posted by Hofstra26

Posted by Karen

Most financial advisors are not fan of 529's, quite frankly, because they can not make any money off of them. You can go on-line right now and set up a 529 plan by yourself.

Of course they would much rather see you in an investment that is commission-based.

I agree a financial advisor wants to make money buuuuuuuut there are so many other investment options out there worth looking into as well that can garner you a great return on your investments.

For us, even when I opened the 529 on my own, I didn't like that you couldn't touch the money once it was invested, it HAD to be used for education expenses, and if I withdrew for anything else it would be taxed and I would be penalized. I wasn't surprised to hear the same concerns from my financial guy. I had already considered that down side to the 529 when I opened it. Ultimately, I just much preferred having an investment where I had full access to my money when I want it and for what I want it for............just in case.

I am not criticizing anyone who uses them, I just felt it didn't fit our needs.

The whole point of a 529 is setting aside funds for college/trade school - so the argument that you can't touch it for anything else is irrelevant to me. I don't want to touch it, that is the whole point!! The odds of neither of my children attending college/trade school is slim, so I am quite happy letting that money grow untouched.

ETA: No other investment we hold (401k, IRA) is coming near the rate of return the 529 plans are.

Sure you don't want to touch it BUT what happens if you need money bc you lost your job or had some catastrophic event? It's nice to know it is there to take in dire emergency

Re: college savings?

Message edited 2/3/2013 12:15:49 PM.

Re: college savings?

Posted by Hofstra26

Posted by Karen

Most financial advisors are not fan of 529's, quite frankly, because they can not make any money off of them. You can go on-line right now and set up a 529 plan by yourself.

Of course they would much rather see you in an investment that is commission-based.

I agree a financial advisor wants to make money buuuuuuuut there are so many other investment options out there worth looking into as well that can garner you a great return on your investments.

For us, even when I opened the 529 on my own, I didn't like that you couldn't touch the money once it was invested, it HAD to be used for education expenses, and if I withdrew for anything else it would be taxed and I would be penalized. I wasn't surprised to hear the same concerns from my financial guy. I had already considered that down side to the 529 when I opened it. Ultimately, I just much preferred having an investment where I had full access to my money when I want it and for what I want it for............just in case.

I am not criticizing anyone who uses them, I just felt it didn't fit our needs.

Message edited 2/3/2013 12:16:18 PM.

Re: college savings?

Points all well taken.