I'm looking for a good way to save for college for my daughter. As a parent of a single income home, I am looking for a way to maximize my savings to reach my goals, but without having to go with a pre-paid plan that forces me to contribute a set amount. Some months are better than others so not every month is guaranteed a contribution. Thanks!
Ways to save for child's college education where one need not commit to set contributions? [duplicate]
2No-one can know what is best for you. Do you want to know the pros and cons of each (that would be offtopic) or where to learn more about them, or some guidelines for how much to set aside - clarify what you're asking.– ChrysSep 20, 2013 at 17:27
1After discussing this with the moderators at Money SE, we've agreed that the question is a good fit for their site (pending some extra information from the OP, such as what country they live in). I'm going to migrate this over there. One final word on the way we categorize questions: the goal is to get the question to the audience of experts best suited to providing high quality answers. While this question may be of interest to parents, the relevant experts are more likely to be found on Money SE.– BeofettSep 23, 2013 at 19:22
Not sure that migration from parenting.se to money.se was warranted. Yes, some of the recommendations may apply to just any kind of savings, but some are specific to the situation (e.g. Child Trust Funds, education-related tax cuts, government programs and scholarships, etc...)– haylemSep 23, 2013 at 19:31
1@haylem We encourage specific questions and specific answers here, too. Education savings, in general, and everything you listed ought to be acceptable subject matter to ask about here (or mention in an answer) if it relates to the goal of paying for your child's education.– Chris W. ReaSep 23, 2013 at 19:41
They accumulate earnings over time and by the time your child goes to college you will be able to withdraw funds for college TAX FREE.
The best part about 529s is that there are several different options you can choose from, and you aren't limited to the plans sponsored by your state, you can use whichever plan works best for you.
For example, I live in South Carolina and use Utah's Educational Savings Plan because it has no minimum amount to open one up and it has low fees.
Hope this helped. Good luck with your search!
In my opinion, whichever plan or commodity system you use is just supplemental to a very simple thing: go to your bank's online account, set up a regular transfer (monthly in my case, maybe weekly for you depending on when you get your salary in your country/state) to a savings' account in your kid's name with a decent rate, and just watch it grow.
Then adjust to salary fluctuations if needed.
Also, prefer a tax-free savings account.
Been working fine for me for my oldest who's now 4 yo. Started by saving only a little each month and increased as our financial pressure eased up a bit.
For his sister, I already set up a similar thing and I will "equalize" both accounts with additional payments over time (Hmm, actually, maybe that's not fair and they just need to be "equalized" in that they both have the same amount for a given age... but that's another question).
Another option, which I set up for my oldest but not for his sister was a child trust fund with an initial payment. We moved countries and I don't find a plan that I find similarly attractive here, and the other one is locked until 18 yo. But, as with all portfolios, it comes with a risk.
Note that I don't live in the U.S. in the land of crazy college fees. Though I've studied myself in countries where fees were already a drag (and I'm being polite) for various fields (IT and music studies, anyone?), I have to say when I see fees for the big league universities and colleges in the U.S. I am kind of shocked. Doable, but good luck with that and with your loans.
529 is good. Though, I would avoid other kinds of investments in kids names and or setting up accounts that are too complex or difficult to use as college costs will come in may aspects starting application fees and travel expenses when looking for college as well as housing and allowance spending.
Since this post was migrated from Parenting, my reply was in the context where it appeared to be misrepresenting facts to make a point. I've edited it to be more concise to my main point.
In my opinion, the best way to save for your childs future is to get rid of as much of your own debt as possible. Starting today.
For the average American, a car is 6-10%. Most people have at least a couple credit cards, ranging from 10-25% (no crap). College loans can be all over the map (5-15%) as can be signature (8-15%) or secured bank loans (4-8%).
Try to stop living within your credit and live within your means. Yeah it will suck to not go to movies or shop for cute things at Kohl's, but only today.
First, incur no more debt. Then, the easiest way I found to pay things off is to use your tax returns and reduce your cable service (both potentially $Ks per year) to pay off a big debt like a car or student loan. You just gave yourself an immediate raise of whatever your payment is. If you think long term (we're talking about long-term savings for a childs college) there are things you can do to pay off debt and save money without having to take up a 2nd job... but you have to think in terms of years, not months.
Is this kind of thing pie in the sky? Yes and no, but it takes a plan and diligence. For example, we have no TV service (internet only service redirected an additional $100/mo to the wifes lone credit card) and we used '12 taxes to pay off the last 4k on the car. We did the same thing on our van last year.
It takes willpower to not cheat, but that's only really necessary for the first year-ish... well before that point you'll be used to the Atkins Diet on your wallet and will have no desire to cheat. It doesn't really hurt your quality of life (do you really NEED 5 HBO channels?) and it sets everyone up for success down the line.
The moral of the story is that by paying down your debt today, you're taking steps to reduce long haul expenditures. A stable household economy is a tremendous foundation for raising children and can set you up to be more able to deal with the costs of higher ed.
3Note that a pre-paid tuition plan is very different from a 529 plan. Your answer seems to describe a pre-paid plan, while a 529 plan is a tax-sheltered investment vehicle without mandated contributions (among other differences). Sep 23, 2013 at 21:11
@JohnBensin my post was made on the parenting forum to make a very general point that I dumbly put AT THE END of the post: Learning how to save money and then investing in yourself (paying off debt) can do wonders for a family and could feasibly create an atmosphere where you don't need such a plan. It's a little late to reword my statement, but I can't for the life of me believe that that point is less important than the misunderstanding I had.– monstoSep 24, 2013 at 19:34
1I understand my misunderstanding. The bottom line is that I also realize that I should have made my point without muddling it by mentioning 529s in any capacity.– monstoSep 24, 2013 at 19:46
1You can always edit your answer to make it more clear. Once a post has been edited, users have the option to retract their downvotes if they decide the edited post is more accurate. Sep 24, 2013 at 19:48
1The edit looks better. The context hasn't changed, however, because savings for a child's education is both a family issue and a money issue. Sep 24, 2013 at 20:26