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Saving for baby
NatashaT1 posted:
Hello all. My first child is now two months old, and I'm wondering how everyone else is saving for their childrens future. Any ideas for saving money now for college etc.? I live in Michigan and we have a couple of savings programs offered by the state, but I would like to see the money grow.....any suggestions?
FrmGirl responded:
I think you have a couple options. We live in Missouri so I don't know if we both have the same things. Anyway...when I was born my grandparents opened a CD (Certificate of Deposit) for me. It was never touched (unless the interest rates went up then we moved it) and it actually paid for 2 1/2 years of my college. It doesn't draw much interest but a litle is better than nothing. For my DS, his grandparents have opened a savings account that they put money in every month. Of course it doens't draw interest so you only get what you put in. I don't know of anything else, really, but I'm not an accountant. I hope this helps. If you hear of anything else please post it so I can get some ideas, too! :)
Hannah(28)DH(26) M/C 2007(early) Early delivery 2008 (23wks) Jude: May 21, 2008 - May 31, 2008; Gabriel: (adopted) Feb 2010.
sarah0323 responded:
I put money into a 529 account. It is invested by the state. Kind of like a 401K. The down side this money can only be used for education. There are some tax advantages to this.
happymoe responded:
We're in Alberta, Canada. We opened a RESP for our daughter at 17 weeks old. The government kicks $500 upon opening and 20% up to $2500 a year. It is invested similar to a RRSP. The good thing is you can put more than one child on the plan, in case one doesn't want to do post secondary, or uses more/less than the other child. If no one goes to post secondary, you keep the money you put in plus the growth from that money, but you lose the government's portion plus the growth on it.
michelleloehr replied to happymoe's response:
we plan on opening a 529 plan but first I have to find a job and we need to get a home of our own so I figure we will be able to start saving for her college starting on her first birthday. My goal is to put 50 a paycheck into it and then half of whatever money she gets for birthday's and christmas's over the years. It probably won't be enough to pay for her whole education but at least it will provide some help.
phoenix31674 responded:
We're military so move a lot and have not looked into how a 529 would work, but they sound pretty good. Right now we have general investments that could be used for college, but we aren't getting the tax benefit. Of course, with states having financial difficulties, it makes me wonder how it would work out with them. and there's the fact we are hoping they are both able to follow in our footsteps and attend the Naval academy - which would then have made the 529s useless as we would have to pay the 10% penalty on top of taxes to get the money out.

The biggest advantage of the 529 is the tax break when the money is used for college.

There are savings accounts at some of the internet banks that are still earning interest, but until the Fed gets off their butt and realizes how much the super low interest rates aren't doing anything for the economy, it won't be much. Even CDs aren't making much right now. and for a young kid, it might be a better idea for the next 10-12 years or so to designate a mutual fund as the college savings vessel. Yes, you'll pay taxes on it, but the money won't be locked in to college so you could end up using it in retirement if your kid doesn't need the whole amount.

Before you save for your kid's college though, make sure you are maxing out your retirement savings. i know you want to take care of your kids, but if you save for their college fund first, you'll find yourself without money to live on for retirement. yes, college loans suck, but your kid will have 40 years of working life in front of them after college whereas most parents have 20 years or less from when the kids graduate college until retirement and the sooner you save for retirement, the less you need to invest per month. and you won't be potentially making yourself a burden on your kids in the future. any sound financial adviser will tell you to invest in your retirement before anything else you do.
NatashaT1 responded:
Thanks a bunch ladies for all the great ideas. Thanks phoenix31674 for reminding me to hit the max on my retirement savings before concerning myself with saving for college. I was told that before, but I didn't have children at the time, so it slipped my mind. I put the maximum (7%) into my annuity, but I don't earn loads of money, so it's not a great amount that I'm saving. I'm thinking about funding an ira first, then using some general investments for college. She's so young, I have quite a while to try and invest aggressively. I've tried to look into opening a trust account, but I can't seem to find any information about it.

You've all been so helpful in getting the juices flowing about my options.

Thanks again ladies.
sarah919 responded:
I agree with all the pps, esp that it's important to fund your retirement first. An alternative to 529s is to invest in a Roth IRA. Roths are traditionally retirement accounts, but can also be used for qualified education expenses. It's an after-tax investment, but then the money grows tax-free. Once you open an account, you can decide on how aggressively you want to invest the money within the account.

I would also recommend talking to a financial advisor. We have had one helping us and it's SO helpful! She charges a very low annual fee, but she has helped us with EVERYTHING, from figuring out our best options for buying a house, cars, where to put our money, how much we need to save, etc. It's so worth it.

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