Monday, March 15, 2010

College savings

I haven't really talked about college savings. We currently have about $3000 saved up for college. My plan is to deposit $1000 a year per child into the 529 college plan. This is already taxed, so whatever is in there can be used for anyone of our kids for education. And if they happen to decide to not go to a university, they can use it for other educational expenses. And if they end up getting full rides or whatever, I can pretty much transfer it to anybody as long as they use it for college. Not too shabby.

I didn't really do much research on these 529 college saving plans. Here are just some of it's benefits:

- You pay no taxes on the account's earnings.
- The child doesn't have control of or access to the account -- you do.
- If the child doesn't want to go to college, you can roll the account over to another family member.
- Anyone can contribute to the account.
- There are no income limitations that might make you ineligible for an account.
- Most states have no age limit for when the money has to be used.
- If the child gets a scholarship, any unused money can be withdrawn without paying any penalty (just the tax).

I opened it up in our Fidelity account. We have asset allocations as follows:

30% Total Stock Market, 30% S&P, 30% International and 10% Treasury

Unfortunately I started putting in 2007-2008. So we have actually lost some of our investment. Our biggest gainer has been the 10% put into treasury index. Who knew?

In any case, our $1000 deposit a year for 18 years @ 10% return will come out to about $45k. If tuition rates continue to grow along with inflation, that will probably be enough to cover two years. Oh well. That means my girls will have to work or find other sources of income... Let's hope for scholarships and some rich aunties and uncles!!

What can a budget do for you?

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