Bright Start (IL) College Savings Plan - Palatine,IL

Updated on November 19, 2010
H.D. asks from Palatine, IL
4 answers

My fantastic dad just opened a Bright Start College Saving Plan for my daughter which I really appreciate but my question is
1-can't you lose money because they invest the money in different things as they see fit?
2-why is it better than just putting the money in a savings account?

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answers from Chicago on

Yes, you can lose money. In fact, there was that big controversy that the safe bonds lost tons of money.

Investing in stocks can be better than a savings account because there is the chance you can make a lot more money. Savings account have very low interest rates. Stocks? They can earn anywhere from 0-30% a year. They can also lose the same.

If you put all the money in their Index fund, you should be OK. It's about the long run, what happens over 15-20 years, not what happens today. So, when the fund loses money, you say to yourself "good, I'm buying stocks cheaper now." In fact, when the stock market crashed and burned two years ago, hubby and I added tons of money to our daughter's Bright start account. Instead of worrying about losing half our money, we just thought about our cheap the stock where.

1 mom found this helpful


answers from Chicago on

we found it much safer to invest in savings bonds if you have a long time to let them grow. example the money doubles if you have 15 years for it to grow. where their is a huge loss that happened at least in illinois with the money being lost from the bright start program



answers from Chicago on

I agree with the other 2 answers.

Some other benefits with college savings plans:
1) You get a deduction on your state tax return (if the plan is sponsored by your state, so Brightstart is sponsored by Illinois, so the contributor would receive a deduction).
2) It's easy to transfer funds between siblings of a family, move into different accounts, move into different plans
3) When you take the money out to use for education expenses, the earnings are Federally tax free (vs the savings account, you would need to pay the tax on the interest every year)
4) Anyone can set up the 529 plan for anyone they want, it doesn't have to be the parents for the children vs a savings bond where for the interest not to be taxed, the parent has to own the bond and use the proceeds for their child
5) Also, qualified education expenses don't include room & board for savings bond
All in all, I think it's just wise to diversify your savings in different investment vehicles. But do your homework to make sure you know all the limitations for each investment to make sure you get the most for your money.
Let me know if you have any other questions.



answers from Chicago on

We invested in Bright Start 529 the month our kids were born and we put $100.00 in each of their accounts per month. We did this because our financial planner said it was the best way to save for college (savings on tax). Well, last year, we lost over $2,000.00 in each of their accounts. It was a big eye opener for me and I've contimplated stopping the automatic deposit, but worry that if I don't, I simply wont have the funds (not that we will have enough to pay for their college in full anyway) to help them later in life.

There is another fund out there where you can start paying at today's rate, but I believe you have to decide which college you want your kid to go to and what happens if you kid decides to go elsewhere?

It's very complicated, but I know if we don't save it in a fund we can't touch, we'd end up tapping into it at one time or another.

Goodl luck.

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