What's the best way to save for college?

[cdlamis]

I am very clueless when it comes to savings, stocks, etc. Can someone explain the best way to save for college? A normal savings acct, a 509 account (I think thats what its called?).

Where do you get a 509 acct? At a bank?
I told you I was clueless!! :) Any advice? We only have about $500 saved for Julia right now but we want to start adding $ every month and my mom wants to add $ to Julia's account too.

Daniella
Mom to Julia 6-13-02
And baby #2 EDD 12-30-04!!

[jec2]

I think we set up the 529 acct and we liked that because the ceiling for contributions per annum was HIGH (not like we'd ever meet it), and that anybody could contribute, the child can have multiple 529 accts., and that we can roll the $$ over to another child although that also has to be used for educucation. If I'm recalling correctly (and I might be confusing a couple of the different accts we looked at) you can use 529 for ANY school related expense, not just tuition and it can be used for ANY level of schooling (private highschool, for example).

Again, I might be confusing a couple different accts. but we like the 529's flexibility and set it up through USAA.

[amazz]

Hi Daniella. I think it is great you want to start saving for your daughters education! As a financial counselor that makes me so happy!

Here is a website that I think will answer several of your questions:
http://www.finaid.org/savings/

I don't know what state you live in, but that will have a lot to do with your 529 plan. You can do a google search with your state and 529 plan to get more specific info.

If you have more questions, please feel free to pm or email me through the boards!

HTH!
Angela
EDD 10/15/04

[Marisa6826]

I think you mean the 529 Account. It allows the maximum contributions, can be used for any child's college education costs (including books), and is easy to open and negotiate.

Sophie has one with The Alliance Fund, and we will be opening one shortly through Franklin Templeton.

We went through our financial advisor to open them.

-m

[hcsl]

Just remember that the law covering the 529 plans is set to expire in a few years, (I think 2010), long before most of our babies will be in college. There's NO guarantee that Congress will renew the legislation. You may want to think about possibly putting it in a Roth IRA. I'm pretty sure contributions to those can be used for educational expenses, and if for some reason she doesn't go to college you're not sutck with an account whose only purpose is for educational expenses or facing an astronomical withdrawal penalty to use the $$ for something else. You also might want to consider just getting an old fashioned savings account. If it's in your daughter's name, though, that money will be counted against her when/if she applies for financial aid.

[Bearhut]

We opted against the 529 plan. There are huge penalties if the child doesn't use the money towards higher education. Since much of my DD's money was gifted to her, I don't want it tied up in a college only account.

It seemed to limiting for us. What if she decides to go to Paris and learn to become a pastry chef? Yum! My husband thinks that theory is nuts, but I don't want to limit her; not at < a year old.

[jbowman]

We opened a 529 account for Ellie through Fidelity. I think that you should weigh all of the options before opening a 529 for the reasons that some of the posters mentioned. That said, it seemed to be the right choice for us!

Good luck!

[abigailsmom]

If you opted out of the 529 plan, what are you using to save for your little one. I want something that my p-nut will be able to use if she wants to go to art school, tech school, college, or any other form of life enrichment. I don't want to lock her into a "college fund" b/c I don't want to stifle anything else that she might want to try (with-in reason).

Sorry if I'm being nosy, but I really don't know want to do with p-nuts savings...

[amp]

We just started a 529 plan for DS a few months ago. We just did the one through our state (KS - Learning Quest). We went to their website and read all of the info. Then we printed an application and sent it in with our initial required investment. Then we signed a form for DH's work to automatically deposit money into that acct. each pay period. It was really simple once we looked into it. No middle man needed. And they send us statments each quarter.

[murpheyblue2]

We opted for a 529. While the law is set to expire the accounts have become so popular that I personally believe it is a long shot that it will not be renewed. IRAs don't allow you to invest enough money per year (still only $2,000 I think) to accumulate signficant savings. If you live in certain states there are great tax breaks for opening a 529. Additionally, the money can be rolled over to be used for another child so if your first child decides not to go to college you can use that money for the second.

This is a decent article on 529s: http://money.cnn.com/2002/08/16/pf/college/q_529_1/index.htm

If you choose a 529 you want to find one that isn't burdened by costs that eat away at your savings. Here's Money magazine's pics for the best plans:
http://money.cnn.com/2002/08/16/pf/college/q_529_1/best_529s.html

[jd11365]

My state offers a pre-paid college fund which locks you into today's rates for any of our state universities. We are pleased with our state universities...I am a graduate of one...and with this fund I can assure she is guaranteed 4 years of college. You can pay it in full...over 5 years...or over 18 years. They have a separate plan for housing but we opted for tuition only at this point. If the child chooses not to go to college, you get your initial investment...not the interest. So the risk is on my child, not on the stock market...I'd rather put the risk in my DD. :) And honestly, knowing her college tuition is paid in full, I can't see a reason why she wouldn't go. If she chooses to go out of state, the state pays what 4 years of our in-state tuition would be and she would be responsible for the difference in cost for out-of-state tuition. That would be her choice and responsibility...I did my part making sure she has a paid college education...in my state. (Nothing like keeping her close to home...;))

HTH!

Jamie
Mommy to Kayla
May '03

[Emmas Mom]

We also decided against the 529 account finding it too limited. I mean what if DD decides to get married? What if we decide we want to help her buy a car. I mean, I'm planning on her going to college but there are other things that come up in life too. We decided on a mutual fund that our financial adviser told us about. There are lots out there. Right now we have a "higher risk" one since DD is only 11 months. We'll monitor it as she grows. It's hard to know what's best to do for them isn't it?! Good luck! :)

[pixelprincess]

You have some great feedback and I skimmed through it quickly. Sorry, if some of it is a repeat.

i have been researching and mulling this over for quite some time and think 529's are still a good way to go. it is most likely that Congress will vote an extension. You can always use a financial counsellor, although with some research you can find a low-cost plan that suits your needs the best. Often you are paying enrollment fees, account maintenance fees, admin fees, management and broker fees... all those FEES, FEES, FEES!!!

Based on what I read a couple months back... the best rated plans on Morningstar were the Michigan Education Savings Program, Utah Educational Savings Plan and another one I can't remember. Based on where you live, you may want to pick the state plan for tax benefits. NY has a sizable deduction... 10K or so in state taxes. There is no tax benefit in CA. so I have been looking at the MI plan through TIAA-CREF. It is even better for residents... matching grants for certain income levels and, MI tax deduction.

Dh's parents/uncle got DS started with a Virginia plan/American Funds which is quite popular, but you have to use a broker.

Here are some advantages i can think of
- anyone can contribute- Grandparents, relatives
- higher ceiling as stated- 11k or 22 k for married couples in 2002
- great choice for inheritance money
- the recipient doesn't gain control of the money unlike custodial accounts
- tax deferred in most states unless used for education
- no age limit for use...so your child decides not to go to college until he/she travels the world
- can be rolled over and used by "family". Family includes original beneficiary's spouse, kids, first cousins (not 100% sure)
- can be used at accredited degree-granting educational institution, public, private, two-year, or four-year and some international schools.

One of the limitations is that is may affect financial aid, but some scholarships are need based too.

Another way to go is Utma/Ugma ( how about just for the fun name), a custodial account which is allows more flexibility in investing. Though, the child is entitled to the $$$, once they turn 18, so they can spend it any way they want...like speed off with a Corvette or Beamer. ha! Though, you could keep it a BIG secret if you think you need to!! The money can be used toward tuition, car, other college expenses too unlike a 529.

HTH, good luck with your decision.