What kind of college fund did you choose for your child and why?

[gatorsmom]

I really, really need to get this set up for my children. But I have no idea where to start lookiing. So, I thought I'd ask you guys what you've done for your kids, and why you chose that particular way to save for your children's futures.

[vludmilla]

We live in NY and use state sponsored 529 plans. I think the desirability of the 529 plans vary from state to state but generally they are a good idea since the money is not taxed when it is taken out to be used for school. We've been happy with ours and we used some online calculators to estimate how much we would need to contribute each year to stay on track for our anticipated college expenses. If you have someone who helps you with your retirement investments, you could ask them for some ideas. I don't know how helpful this really is. I'll think about it some more and post again if I have better advice.

[BillK]

Iowa 529 here because at the time PA's 529 sucked (I believe it's gotten better but it still is not as good as Iowa's). I really like that Vanguard is the administrator of the Iowa plan too - they traditionally have the lowest expenses of most any fund manager - plus they have a good track record.

[stonecali]

We live in California and use the CA 529 plan. California is one of the states that doesn't offer a specific tax advantage to using our own state's 529 plan, so I could have chosen from any state-sponsored 529 plan. Some state's actually are better for their residents. They could offer some state income tax benefit or fund matching.

For Minnesota, if you went with the Minnesota sponsored 529 Plan, it says that state will "match" you - "up to $400 per year matching grant for Minnesota residents, subject to income limitations" - I do not know what those limitations are, or if there are any other benefits to Minnesota residents.
http://www.mnsaves.org/

I found something on this website http://www.finaid.org/savings/529ratings.phtml that says:
"The New York, Minnesota, Missouri and Michigan plans are particularly outstanding for state residents."

Notably, 529 plans are where we have chosen put our college savings money because your money grows tax-free if ultimately used for school related expenses (including primary and secondary education - not just college/grad school). Also, the parent has control of the money at all times (some types of accounts are in the child's name - this account is in the parent's name) Also, funds not used for one child can be transferred to another child (i.e. if you overestimate your child's educational needs!).

[MelissaTC]

We are doing the Virginia 529 plan. When researching our options, we discovered that unless we do private investments, we were limited to a 529 plan.

[juliasmom05]

We live in NY, so we contribute to the NY 529 program. For us it makes sense because of the state tax benefits. Here is a good site that allows you to directly compare plans to find out which one works best for you.

http://www.savingforcollege.com/college_savings_201/

HTH

Marci

[o_mom]

We use the Iowa 529 right now, even though we don't live in Iowa.

The reasons for choosing a 529 was the tax free growth, parental control of money, assets considered parents' not child's, transfer to relatives if not used, and withdraw contributions without penalty.

We went with Iowa at the time because of low fees, fund choices with low fees and they are a Upromise affiliate. Our state did not have any incentive for using its relatively high cost plan. They have instituted a tax credit now, so on my list of things to do this year are to look at what the fees would be in that plan and if we want to change over to using the one from our state.

My parents contribute to a 529 in their state because they get a tax credit for it. Also because then they are in control of the money.

[JBaxter]

we have 529 accounts for the boys. Dh has had the same stock broker / financial advisor for years ( FIL also uses them so we get breaks on fees because its a family thing :) ) He set them up and we have an auto withdraw so we put in money monthly

[spanannie]

We started out in the TX fund, since our Financial Planner put us in that one (plus we live in in TX). Once I started to research, I realized that the TX plan is not a strong performer. I forget what sites I went to, but, after much research, we decided on the NY plan and switched our money there.

[KHF]

I'm in KY and use the Iowa 529 Plan for all of the reasons other people have stated. Vanguard manages, low fees (and they actually just lowered them again), portfolio option selection, generally overall it seemed like a good fit for us. I work for an investment firm and I had one of the consultants look over the plan we chose and he agreed that it was a good plan.

KY doesn't have any tax advantages for using their plan, so I didn't even consider that one.

Kirsten

[jerigirl]

We chose a 529 plan through Vanguard because Vanguard has some of the lowest expense ratios on their mutual funds, especially since many of their fund options are index funds rather than actively managed funds which tend to take a larger cut of the money. Vanguard’s fund is through the state of Nevada. It is tied to U-Promise if you’re interested in getting bonus money from credit cards and shopping transactions.

jeri

[lizajane]

utah 529. we live in NC. DH choose utah because, among other reasons, the money belongs to US (as in DH and me, not the united states! lol!) and not to DC. so if DC get full scholarships or do not attend college, the money is in our name and they do not get it to keep it even though they didn't spend it on college.

[BeachBum]

We did Nevada's 529 through Vanguard.
I think we may also do a "pre-paid" program through our state for tuition if we have another child. Since both types of plans are transferable to a relative it shouldn't really matter. The in state "pre paid" programs seem great if you can guarantee that your child will go in state.

[stefani]

My workplace offered 529 plan through College Bound Fund, so that is what we have for DS. It is deducted out of my paycheck, pre-tax. The minimum I think was $25 or $50 per paycheck, so we started with that and trying to increase it slowly.

[katydid1971]

Look at savingforcollege.com. It rates the different state's 529 plans and has costs etc. We are with our state's 529 and we are very happy with it. When we set it up we did look into cloverdale accts but decided the 529 was a much better deal for us, now i can't remember why. :)
HTH

[KrisM]

We aren't specifically saving for college. We're both in our late 30's now and have figured that the money we can save each month needs to go towards retirement savings, so we have Roth IRAs. With the Roth, we can take our out contributions to use for college, without a penalty. But, if the kids get a scholarship or for some other reason doesn't need the money for college, we aren't paying penalties on getting the money from a 529. Plus, we can always decided to borrow for college, but we can't borrow for retirement!

[JoyNChrist]

We aren't specifically saving for college. We're both in our late 30's now and have figured that the money we can save each month needs to go towards retirement savings, so we have Roth IRAs. With the Roth, we can take our out contributions to use for college, without a penalty. But, if the kids get a scholarship or for some other reason doesn't need the money for college, we aren't paying penalties on getting the money from a 529. Plus, we can always decided to borrow for college, but we can't borrow for retirement!

We're doing this as well. Our financial advisor actually told us not to worry about saving for college at this point. And I guess I feel like, if for some reason I'm not able to help my child and he wants to go to college badly enough, he'll find a way. DH and I both had scholarships, but because I chose to go to a private university, I had to take out student loans to make up the rest of the costs. My parents weren't able to help me at all, but I still went and graduated. Of course I don't exactly enjoy paying back student loans, but my education was important enough to me to justify it. But I'm not going to have that kind of option for retirement. JMHO. :)

[ha98ed14]

We are also in our mid 30s and I got the same advice: Save first for your own retirement. For those with the means to save for both, go for it. For us, living expenses take up most of DH's paycheck. One thing I did do was set up a college savings account through our credit union and I have been putting all the cash gifts we get for DD into that. She is too young to know where her Bday or Christmas money goes anyway. I feel like these efforts are like a drop in the bucket, but it's what we can do right now.

So just another plug to save first for yourself.

[belovedgandp]

Repeating a lot of what has been said.

529 plans are great for the tax benefits, but can only be used for qualifying college expenses. Check your state plan for performance/fees plus any tax break you might get for contributing.

Invest for your own retirement first. I think the numbers thrown around for college expenses are scary, but retirement will be even scarier. Roth IRAs are a great option. Fully fund those before doing any additional investing for college.

An option not mentioned that we also did (we've had a couple of windfall years recently and have been stashing money away since the next five won't be as great), are Educational Savings Accounts (ESA, also known as Coverdell IRA). They are similar to Roth IRA. I think the limit is 2,000 per year. Part of the appeal for us was that the definition of "qualifying educational expense" is much broader for the ESA than a 529 to withdrawal funds from. Computers, private high school tuition, etc. Now I've read that the tax laws need to be "re-upped" before the expire in 2010, so I'm not exactly sure about that.

[Marisa6826]

State sponsored 529 plans. Sophie has a NJ and NY. Mia has NY. Both girls' plans are courtesy of Grandpa. :)

-m

[kijip]

We are not saving for college. We don't think we will start saving for college at any point very soon either.

These are our reasons why:

-Retirement savings set aside now have longer to grow and fully fund our non-working years. We can borrow for education expenses, but not for retirement if needed. Our retirement is much more important for us to save for right now.

-We are in our mid to late 20s. Toby will be college age about when our incomes are coming much closer to their peaks. We are just starting out now, and have a lot less in terms of income now than we will then. At that time, our mortgage will also potentially be paid off or will at least be a significantly smaller percentage of our income (currently it is about 28% of our income) since it is fixed and our incomes will only rise. Especially J's income, as he will then be a pharmacist is 10+ years experience vs. now being a student and a part-time pharm tech making $17/hr. In short, we will be in a much better place then to shoulder tuition costs. My salary can be expected to more than double as I advance in my field.

-I believe firmly that college expenses must be born in some significant way by the student. I paid for mine and did well and made it work without much debt. My husband's schooling that was covered by his parents was a total boondoggle fresh out of high school and I refuse to waste my money like his parents did. Now that he is back in school and paying himself, it is a much more productive experience. I am not saying we don't want to help- we do. I just don't want Toby expecting a free ride.

Honestly, I won't start a dedicated college fund for him until we are more then fully funding retirement and all other needed savings accounts, have paid all of our own education costs and have a large surplus of money to save. At our current income level, we are comfortable paying our mortgage and saving the match amounts for retirement accounts+IRA contributions. I see a lot of parents saving for college while they are:

-not saving for or not saving enough for their age group for retirement
-do not have life insurance
-are carrying consumer debt
-have their own educational expenses or loans to pay off

I would recommend that no one who says yes to any of the above four items saves for college expenses.

That said, my answer might be different if I expected my son to enter college around the time that I was retiring...so age of parent has something to do with it.

I do save all gifts we get for him in an account I figure will help with college expenses. He gets a lot of gifts. :)

[ett]

For all the reasons stated above, we are also not specifically saving for college but putting the money into Roth IRAs.

[bisous]

I'm following mostly the same plan as Katie. I plan on fully funding retirement and working on paying off my mortgage (hah! we're renting right now!) before I plan on using a 529 or other vehicle.

I mostly put myself through college and it was a great experience. DH on the other hand has HUGE student loans that we are now dealing with and that isn't fun so I haven't fully decided what kind of involvement I will have in providing a college education for my children.