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710 Posts
Discussion Starter #1
So our kid is approaching his first year and the more he grows the more I think about his future. My wife and I have good jobs with good income, we both have savings for emergencies and our personal retirement accounts, we budget to have at least one vacation yearly. Ive also made it a goal to save so I could live a year if I loose my job before I start investing. However I want to start doing something for my kid's future so he can pursue a higher education if he wants to. I would like to know what is everyone doing about it, we will be receiving a small refund from taxes due to him, which will be put in a CD until we decide exactly what we want to do. I have read on different savings options and I don't think I would like to go with the college specific type of accounts in case the kid decides college is not for him, or if he is good and obtains scholarships he can use the money for other things or worst case scenario he doesnt care for school the wife and I can use the money for us :laugh: . Point is, I want to get that option for him and better start now. And at this rate I am so sure he will not be able to obtain any kind of financial aid.

So, what are you doing? What do you suggest? What do you like and/or dislike about your current savings plan?

26,162 Posts
At this point, I am not doing any KID specific savings.
Initially I did start a 509 account for each kid and now they each have a couple grand there. But I stopped contributing.

My mentality is this. I need to save for MY and MY WIVES future & retirement first. I cannot get loans or grants to pay for my retirement. If I solidify those things 110%, then I can save for someone else.

My kids may or may not go to college.
If they do there are potential scholarships, grants, and lastly loans to pay for their schooling.

But if they decide to go to trade school, the military, or become an instant internet billionaire... I dont want my savings for them to be penalized when I pull it out. I dont want to have to worry about changing the account beneficiary to a niece, nephew, grandkid... etc.

Add to this.
I can fund a Roth IRA with $5500 (2017) per year. My wife can fund a Roth IRA with another $5500 per year.
That's $11k in retirement savings that will work for OUR retirement, but if the time comes that we want to pull money out to pay for kids school... go right ahead. Withdrawing Roth IRA CONTRIBUTIONS is always tax and penalty free. (please google around, etc if you want proof)

So now do the math. $11k/yr. lets say 17 yrs because your kid is 1 yr old. $187,000 saved for your retirement, that has the ability to be dual purpose and used to pay for the kids schooling if needed. Top that off with any investment gains still being left over in the account for you to access once you reach 59.5 yrs old, and I don't see much of a downside here.

For me there are just too many unknowns, or locked in conditions.
My own retirement needs.
I dont know if one or both of my kids will even end up in college, at 2 and 4... its very hard to be sure.
Will the kids have some/all of their own funding?
Will public college even have a tuition cost 15 years from now?
If we dont use the $$ for college, we get penalized on withdrawal.

This may seem a little cold. But I have no issue making my kids work hard earning their own way. My wife and I both grew up with modest means. We both went to college (she even has a masters). And we BOTH used student loans.
In the end. If the kid puts in the work and is a success at college, we can always help out in paying off any outstanding education debt AFTER its all said and done.

Your choice might be different if you live in a State that gives you a tax benefit for contributing to your specific States plan.
This might be good. But consider, not all State plans are that great. And your money still ends up locked in for education.

IMO, I prefer having more choices and flexibility instead of less.

7,308 Posts
We have a 529 going with a few grand in each of the kids accounts, but just purchased life insurance for them. I was really against the idea until I learned more about it and it makes so much sense. Basically they can never be denied life insurance regardless of any health conditions now. On top of that, it starts to collect money from the beginning and is accessible to them once they hit 18. We went with a $200k policy for each and when they hit 18, there will be $5k that can be accessed. If we ever get some extra cash, we can put it in to build the equity and can also change how aggressive we are with building funds in it. It's an option available.

Our goal is to have around $25-30k by the time they are 18 in each account. We have never intended on paying for their college and they'll need to have loans and work. This is money to help them so they don't struggle the whole time.
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