My wife and I are looking at starting something up to save for college tuition for if/when we have kids. We have a bit over a thousand to start up this investment and then budgeted to add a bit every month but I don't know where to start as far as where to invest it. So can anyone point me in the right direction?
Perhaps look at bonds once the government is up and running.
Stick it under a mattress..
No, seriously, it seemed like everyone who's parents had saved for their college got boned for it on all the financial aid because most ties to "need based" on some level. I'd seriously consider making deposits to a safe deposit box...
I started Educational IRAs for my kids when they where born. You can add 2k per year to them, and they grow tax deffered and come out tax free (like a Roth IRA) when used for college expenses.
My parents set up a mutual fund using money from my grandmother's estate when I was born and it helped a great deal with college.
cdowd wrote: I started Educational IRAs for my kids when they where born. You can add 2k per year to them, and they grow tax deffered and come out tax free (like a Roth IRA) when used for college expenses.
If we decide not to have kids, how much would it hurt to withdraw that money not for college expenses?
bluej wrote: Stick it under a mattress.. No, seriously, it seemed like everyone who's parents had saved for their college got boned for it on all the financial aid because most ties to "need based" on some level. I'd seriously consider making deposits to a safe deposit box...
This has to do with parents income level rather than what they have saved, in my experience.
Datsun1500 wrote: Maryland has a program where you can lock in this years tuition rate. To me that is by far the best option. The cost increase will be more than what you can save over the 18 years.
I don't believe Alabama has this anymore and it would also require us one already having kids, two us knowing that we weren't going to move and three that our kids would go to in-state school.
In reply to 93EXCivic: If we decide not to have kids, how much would it hurt to withdraw that money not for college expenses?
I believe you have to have the kids first to participate. (I need to read better).
I'd just put it away in a low load fund until you actually have kids. At that point, look around for the best tax advantaged plans and roll from there. And remember, save for yourself first. Kids can get scholarships or loans for school, you can't get those for retirement.
mazdeuce wrote: I'd just put it away in a low load fund until you actually have kids. At that point, look around for the best tax advantaged plans and roll from there. And remember, save for yourself first. Kids can get scholarships or loans for school, you can't get those for retirement.
We are putting a pretty good amount away for retirement. What do you mean by a low load fund? Something like a CD?
There's a thing called a 529 savings plan specifically designed for saving for college expenses. I think it works similar to a 401k but since I don't have kids I've never looked into it.
My understanding of the 529 is that it can be rolled into a 401k if there is anything remaining. Not sure if that means parents or kids, but you probably can start one before kids.
$50 out of every paycheck (assuming you get paid every 2 weeks), just put into a savings account, is $23,400 after 18 years. If you and wifey can each pitch in $50 every 2 weeks, thats $46,800. Thats enough to get a year or 2 under their belts, after that, they better find a job and take out a few loans.
My parents got $20k approx from my grandpa's estate for my college. My parents paid for the first two years, I was on the hook for the rest. Between my frugal lifestyle, working (only worked 5 weeks in 4 years as a wage slave chump, the balance of the time was throwing house parties, selling vinyl decals, car parts, and jetski parts) and student loans, I didnt suffer in college. I still owe $5k on my student loans after 8 years. I could write the check and be done, but I like having a cushion in the bank account especially with the new house and the planned garage updates.
bluej wrote: Stick it under a mattress.. No, seriously, it seemed like everyone who's parents had saved for their college got boned for it on all the financial aid because most ties to "need based" on some level. I'd seriously consider making deposits to a safe deposit box...
This is correct! If you start one of those 409 plans, or whatever they're called, the college will look at that and say great! That's $XXXXXX we don't have to give you now.
The best plan is to teach your kids to be smart, well-rounded students that colleges want to have. They'll throw money at you then.
Duke wrote: The best plan is to teach your kids to be smart, well-rounded students that colleges want to have. They'll throw money at you then.
I am well aware of this. I got full tuition payed (up to 15 hours a semester fall and spring) but it still required a decent amount of money to finish between the classes the scholarship wouldn't cover, lab fees, books, room and board etc. My parents were kind enough to save some money for me so that I left college with minimum debt (around $5k) and I would like to be able to pass some of that on to my kids one day but I will expect them to pay their own way for the most part (either by scholarship or working).
93EXCivic wrote:mazdeuce wrote: I'd just put it away in a low load fund until you actually have kids. At that point, look around for the best tax advantaged plans and roll from there. And remember, save for yourself first. Kids can get scholarships or loans for school, you can't get those for retirement.We are putting a pretty good amount away for retirement. What do you mean by a low load fund? Something like a CD?
No, I mean a stock fund that is very efficient and has a very low fee. The funds at Vanguard are very good at this at all levels, but especially once your savings gets bigger. You're looking at a time horizon of 20 or so years, you can afford risk at this point, but you'll lose a lot of gains to management fees if you're not careful. If Vanguard has college savings options in your state, then they're good at that too and their adjusted risk funds that shift to less risky investments as college gets nearer seem to be well run. That's what I have set up for each of my four kids.
I've watched several friends who've saved and or locked into various plans, including maryland s. each has gotten hosed, frequently quite badly. The schools take the parents savings, home equity, and retirement funds as money to be given to the schools. Only after the parents are sucked dry are they eligible for needs based discount ar scholarships and such.
At best, saving for college gets you two years worth of school at state colleges. That's not much.
Look closely at what those college savings plans do not cover. Generally things like books, lab fees, room, board, athletic fees, activity fees, emergency fees, etc. the state ones that lock tuition lock only tuition, and only in select schools. Some offer zero interest if not used and cashed out.
Now, go look at private schools and the endowments many offer a kid they deem worthy of their school. The whole "state school is cheap, can't afford private schools" thing is being turned on its head.
Lastly, brick and mortar may well be eclipsed by online schools. A whole new cost and learning structure.
foxtrapper wrote: I've watched several friends who've saved and or locked into various plans, including maryland s. each has gotten hosed, frequently quite badly. The schools take the parents savings, home equity, and retirement funds as money to be given to the schools. Only after the parents are sucked dry are they eligible for needs based discount ar scholarships and such.
At that point, if you are saving for retirement correctly anyways, you might as well save everything you can (after retirement) in the 529.
My dad said he just viewed it as a 30k pay cut for 4 years, with a 30k raise at the end of it. Didn't end up being nearly that much for me (state school + my own savings + some scholarship made it more like 5-7k a year for Dad, which was about the same as hockey anyways), or my older brother through scholarships that came from endowment at a private school.
i can not give investment advice, but after just having to pay cash for my daughter to go to a major university and when i say paid cash i mean every penny of my paycheck for the last 4 years, i congratulate you sir!!!
mazdeuce wrote:93EXCivic wrote:No, I mean a stock fund that is very efficient and has a very low fee. The funds at Vanguard are very good at this at all levels, but especially once your savings gets bigger. You're looking at a time horizon of 20 or so years, you can afford risk at this point, but you'll lose a lot of gains to management fees if you're not careful. If Vanguard has college savings options in your state, then they're good at that too and their adjusted risk funds that shift to less risky investments as college gets nearer seem to be well run. That's what I have set up for each of my four kids.mazdeuce wrote: I'd just put it away in a low load fund until you actually have kids. At that point, look around for the best tax advantaged plans and roll from there. And remember, save for yourself first. Kids can get scholarships or loans for school, you can't get those for retirement.We are putting a pretty good amount away for retirement. What do you mean by a low load fund? Something like a CD?
I would say at least twenty years if things go according to plan since we aren't planning on starting to try to have kids for another 5 or 6 years. Basically what you are saying is go talk to some investment groups to see what they offer which have low fees?
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