Advice on Starting a College Fund

Updated on March 17, 2011
R.D. asks from Haymarket, VA
7 answers

Hi Moms,
We have not started a college fund for our kids yet. I'm looking for advice on which is the best way to go. I heard that the 529 fund can change so it's unpredictable regarding how it may be taxed in the future. Any suggestions?

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answers from Pittsburgh on

We've opened a 529 plan. I haven't heard anything about it "changing" down the road.....

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answers from Boston on

Right now a 529 plan is the best option for most people. The tax protection was made permanent with the pension protection act in 2006. Talk to a financial adviser if you have unusual circumstances, but for most of us, as long as you are reasonably sure that at least one of your children (or you or your spouse) will have higher education expenses this is the best plan out there. The tax benefits are substantial, the plans are flexible, there is a wide variety of good fund managers offering them. Your state also offers an additional tax break if you use your state-sponsored plan - I'm not sure which asset manager controls the investments for your state's plan, but if it's a company you trust (Vanguard, Fidelity etc.) then it's best to consider using your state's plan. If you don't like the investment manager, all of the big investment firms have plans available and you can just pick the one that you want, even if it's in another state.

Other options include pre-paid tuition plans (sometimes this option is bundled in with a 529, depends on the state), UTMA and UGMA accounts, and life insurance. I would avoid things like the Gerber college plan (which is really life insurance) at all costs as it is just not an appropriate or effective way to save for college but the other types of savings accounts may make sense under certain circumstances.

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answers from Washington DC on

Sean Welsh ###-###-####
AXA Financial Consultant and good friend
He can be SO helpful and make it really simple for you to plan for the future.

Plus, he'll come to your house!

Best of Luck!



answers from Honolulu on

It is BEST to ask a Financial Consultant or tax consultant.
It is SO many details... and the laws change all the time. For a layperson to decipher it all, can take a lot of time.

College funds can also affect if they get financial aide etc., and it 'can' count toward their income etc.

There are many ways to save for college or a minor child....


answers from Dallas on

Good for you for looking into this. Many parents believe their children should foot the bill and then the children come out of college full of debt and are strapped the rest of their lives.

If you are not fully aware of all programs, it would be best to speak with a financial advisor and find out about all options.

We do have a 529, numismatics, savings bonds and savings accounts set up for our 16 yr old. She will hopefully be fully covered.. we do plan to cover her college expenses. Of course she will have some sort of small job for extra cash but her "job" is getting her degree and achieving her goal.

We've heard nothing about the 529 changing, however we don't put all our eggs in 1 basket just in case there are unforeseen changes.

We started saving for her college before she was born. Our goal has been $10,000/year and we have been able to manage that. On good years we add more. You can't count on scholarships, although that would be nice.

It is equally important to have your retirement funded as well. You have to balance it all out.

We've been fortunate, my husband is very much a numbers guy, we are planners, live debt free and hopefully continue to make solid business/financial decisions.

We feel it is our personal obligation as a parent to get her out of college debt free. I realize we are in the minority and I have been slammed many times with mamas telling me that my daughter is spoiled and won't value her education... BLAH. She respects the fact that her parents are being responsible for her. She has some very high aspirations and she knows she has a team behind her to support her financially, emotionally all the way.



answers from Milwaukee on

We have a 529 fund set-up for our son since he was born and he's almost four. We put in $50.00 a month and he also has a savings account.

It'll NEVER be enough for school but we're at least making an ATTEMPT to help him unlike our parents so that gives me a little sense of comfort.

I fear when he does get to be that age, college will cost way too much and he'll never be able to EARN enough to pay back the loans. Kind of makes you rethink a college degree. :(



answers from Erie on

great question this is something i need to think about too.

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