Last updated on September 30th, 2021 at 10:19 am
By: Kerry Bergeman
College seems like a world away but with the expense and rise in tuition it is best to start some sort of savings plan as soon as you have a social security number for you little scholar.
One of the most popular plans out there is the 529 College Savings Plans. There are two sides to this plan, the Savings Plan which I outline briefly below because I feel it is the most attractive and The Prepaid Tuition Plan.
The Prepaid Tuition Plan basically allows you to purchase your child’s future tuition rate at the current rate. This works best if you know where your child will go. A family who has a history of only attending Duke for example would benefit from this type of plan.
Unfortunately that is a rare case. Below, as I mentioned is what I feel is the best plan for my family and why. But whatever you decide consult an advisor, do your research and make the best decision for your family.
Benefits of a 529*
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All money grows federal and state income-tax free
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All withdrawals used for qualified higher education expenses are exempt from federal income tax
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Many states also exempt withdrawals from state income-tax for qualified higher education expenses
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The account holder retains control of the assets within the program regardless of beneficiary’s age
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Most plans have very low minimum monthly contribution limits making them attractive to families regardless of income level. Some states have minimum limits as low as $15.
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Money can be used to pay for tuition, fees, room, board, books, supplies and required equipment
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Contributions can be made conveniently through payroll deduction or automatic transfers from a bank account
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Assets within 529 plans are protected from bankruptcy
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The beneficiary can be changed at any time to another member of the beneficiary’s family
This last bullet is a very attractive feature. When you have more than one child being able to transfer funds to another beneficiary seems extremely practical.
We opened accounts for the girls when they were about a month old. We contribute anywhere from $20- $100 a month and sometimes we even need to stop making payments for a time but at least there are funds in there gaining interest.
For the first few years of their lives we simple asked family and friends to make contributions to their accounts instead of gifts at birthday and holiday time. Babies and young toddlers are perfectly happy with a few gifts. Take advantage of this young age before they start in with the “I wants”.
Great times to give a donation:
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Showers
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Birthday parties
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Christmas and other holidays
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Baptism, First Communion, Confirmation or any religious celebration
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Graduations
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Job well done gift
If you feel guilty not giving a child a monetary gift split the cost of what you want to spend on the child. Buy a gift worth 40% of your budget and put the other 60% into the savings account.
We feel it is important to teach the kids about money as well. They are only 4 ½ but we discuss how money is used to buy things and how to save for those bigger purchases. They have little piggy banks and as they are getting a better grasp on finances we will have them count out their own money to use to buy ice-cream or treats.
Now on the flip side of this is the argument that each person should pay their own way through college; strive for scholarships, grants, loans.
Some parents even encourage their child to get a loan due to the low interest rates and they will help or will pay the loan off for the child.
We personally feel accountable for our children. We want them to focus on school and living a fun childhood, free from stress that will undoubtedly take control once they become an adult and enter the working field.
Our retirement does come first however helping them get a start on their educational savings account will undoubtedly help them achieve the ever coveted college degree.
*Savingforcollege.com– This is a good resource to get started with figuring out your states laws/regulations. It’s important for each family to meet with an adviser and do homework to find out what plan works best for them.
Kerry blogs at New2Two about life as a mother of 4 year old twin girls while expecting her second set this December. She shares her struggles with infertility and creating a dairy-free life for her daughter.
Tags: College, Tuition, College for twins, College tuition, donations to college fund, college fund, when to start a college fund for kids,
