Bam Posted January 2, 2006 Report Share Posted January 2, 2006 Just wondering what everyone is doing to save for their children's future or their education? I have a savings account started for my daughter, but there is no way that it'll ever compete with the likes of college costs in 20 years. I'm looking for new ideas and different methods of how everyone affords for their kids to go to college, if at all. Also, does anyone know anything about savings accounts and tax? If I/she were to withdraw the majority or a large sum from her savings account, say in 18 years or something, would she be taxed on it? Is there a limit per year that one is able to save without being taxed? My local bank wouldn't explain it thoroughly enough to my liking. Thanks Matt Quote Link to comment Share on other sites More sharing options...
wnaplay1647545503 Posted January 2, 2006 Report Share Posted January 2, 2006 I will push my kids in the direction of the armed forces. Or just pay it out of pocket. Quote Link to comment Share on other sites More sharing options...
iwishiwascool Posted January 2, 2006 Report Share Posted January 2, 2006 You should definitely consult a financial advisor to make sure you are making the best choices. I can tell you that a standard savings account definitely isnt the answer. I have a younger sister whose tuition I know I am going to be paying so I have started some kind of dedicated account for her. My sister is a very good advisor and could certianly answer your questions with much more authority than most here. PM me if you'd like her info. Quote Link to comment Share on other sites More sharing options...
wnaplay1647545503 Posted January 2, 2006 Report Share Posted January 2, 2006 You should definitely consult a financial advisor to make sure you are making the best choices. I can tell you that a standard savings account definitely isnt the answer. I have a younger sister whose tuition I know I am going to be paying so I have started some kind of dedicated account for her. My sister is a very good advisor and could certianly answer your questions with much more authority than most here. PM me if you'd like her info. Hes definately right there are many types of accounts that yield better returns and interests than your typical savings account. The yahoos at the banks arent always informed enough to give you the long term perspective on what you are hoping to accomplish. Get informed with a qualified financial advisor and they will be able to tell you what the best options are for you considering criteria such as what type of school, possible career choices your child may go into and what the cost will be when your child becomes of age. Quote Link to comment Share on other sites More sharing options...
Conesmasher Posted January 2, 2006 Report Share Posted January 2, 2006 There are basically 6 different types of options that you have available to you. Coverdell(Educational) IRA - Similar to a regular IRA, but must be used for educational expenses. IMO 2nd best to 529 plans, $2,000 max contribution per year UTMA/UGMA custodial accounts - What many used before the Coverdell came to be, but basically allows you to make tax deductable contributions to an account for a child or grandchild. $11,000 max contribution per year, no tax savings Basic Savings Account - Pretty straight foward EE Savings Bonds - If you are scared of financial markets 529 Prepaid Plans - Tax deductable, pay for college costs at today's prices, unfortunately they hurt financial aid by taking away dollar for dollar every dollar you save. Maximum $11,000 per year or a $55,000 5-year plan 529 Savings Plan - My favorite, tax deductable, many income limits do not apply for tax deductability or contributions. Maximum $11,000 per year or a $55,000 5-year plan **I have a pretty big spreadsheet if you would like to use it, it covers some facts of these plan. I am by means a financial advisor, nor do I know what is in your best interest. Just remember that the cost of school is going up at 5-7% a year, and also don't forget the Hope Education and Lifetime education credits come tax time, these can score some big bucks for school. Quote Link to comment Share on other sites More sharing options...
JCBCPA Posted January 2, 2006 Report Share Posted January 2, 2006 There are basically 6 different types of options that you have available to you. Coverdell(Educational) IRA - Similar to a regular IRA, but must be used for educational expenses. IMO 2nd best to 529 plans, $2,000 max contribution per year UTMA/UGMA custodial accounts - What many used before the Coverdell came to be, but basically allows you to make tax deductable contributions to an account for a child or grandchild. $11,000 max contribution per year, no tax savings Basic Savings Account - Pretty straight foward EE Savings Bonds - If you are scared of financial markets 529 Prepaid Plans - Tax deductable, pay for college costs at today's prices, unfortunately they hurt financial aid by taking away dollar for dollar every dollar you save. Maximum $11,000 per year or a $55,000 5-year plan 529 Savings Plan - My favorite, tax deductable, many income limits do not apply for tax deductability or contributions. Maximum $11,000 per year or a $55,000 5-year plan **I have a pretty big spreadsheet if you would like to use it, it covers some facts of these plan. I am by means a financial advisor, nor do I know what is in your best interest. Just remember that the cost of school is going up at 5-7% a year, and also don't forget the Hope Education and Lifetime education credits come tax time, these can score some big bucks for school. Good write up! The 529 Savings Plan is my favorite also. This is the best time to start while your daughter is young. Quote Link to comment Share on other sites More sharing options...
Guest Evl Mdgt Posted January 2, 2006 Report Share Posted January 2, 2006 When I was growing I didnt get an allowance... my dad would always put every cent of change he had (not bills just cents) into a jar and give it to me every week. He never really uses credit cards, always cash. Plus with him being an over the road truck driver, he ate out a lot, etc. Every 2 weeks I would cash in that change and have damn near 60 bucks each time. (if only i had saved it instead of spendign it lol) So for our daughter we are somewhat doing the same thing. We put all of our change , except the penny's cuz there is always so damn many of them, in her piggy bank. We put the penny's in a seperate jar and when that jar gets full, we are going to cash it in for bills and then put the bills in her piggy bank. All the birthday money, etc she gets is going in there (untl she gets a little older, she can use that on whatever she wants). When she gets old enough to get a job, and gets one, I am going to have her put at least 25 out of every check in there to put away for school. When that bank gets full or she turns 1, which ever comes first... I am going to go to Fidelity Investments and open a 529 plan for her. A 529 plan is also known as a CIT or College Investment Trust. They can only use it for school and it is TAX-FREE and in some states is state income tax free. Its really easy to contribute to the account once it is set up (they have same day account set up, there is an investment branch in polaris for your convienance). When you set up the account, or any time after that, you can go online, call, or even go to the branch and fill out a request form to have a Money Line set up which is also known as EFT (electronic funds transfer) and do what is called an FAAB(Fidelity Automatic Account Builder) What that does is say you wanted to put $20 in the account every month on the 15th... it would automatically pull it out of your account and put the money in the 529 account and you wouldnt have to do anything. Or you can not set up the FAAB and just have the Money Line and move the money when ever you want to put some in there. If you want some more info on the 529 plans at Fidelity, either go to http://personal.fidelity.com/planning/college/content/fidelity_managed_529_plans.shtml.cvsr?refhp=pr or just ask me. The reason why I chose Fidelity over a bank or any other investment firm, such as Smith n Barney, etc. Is because I use to work there... I know how their processes work and that its a really good place to do investment business with. They are really good about doing things when they say they will, especially with setting up accounts. They have guaranteed same day process (where your account is set up the same day as when you put in the request.). And their phone reps actually know what they are talking about when you call in and ask questions. They train their workers very thoroughly and will not let you out of training no matter what until you get it right. Its a very good company and I wouldnt go any where else. Quote Link to comment Share on other sites More sharing options...
RS69 Posted January 2, 2006 Report Share Posted January 2, 2006 I have money placed in.... Bonds Roth IRA Savings acount I Bond => having done this yet, but will be in the next month. This is so cool, this is paying out ~9% and no state or local taxes and you defer cashing it out as soon as 5 years or up to 30 years. for my kids future college accounts Quote Link to comment Share on other sites More sharing options...
Science Abuse Posted January 2, 2006 Report Share Posted January 2, 2006 Swear jar.....keg....er, barrel. To start with I was more thinking of a joint savings account with a direct deposit. That way the money goes in without you ever realy knowing, thus it'll pile up faster. Quote Link to comment Share on other sites More sharing options...
Bam Posted January 2, 2006 Author Report Share Posted January 2, 2006 Iwish....You've got PM. Everyone else thanks for the info, I'm not sure what I want to do, but would definitely like more information on the bonds, etc. With everything that gains the best interest and is tax deferred is there a time limit that the $$$ has got to be in there for? And is there usually a charge to take the money out? I definitely need to see a financial advisor, because I'm not sure I want my daughter joining the armed forces, you never know what it'll be like in 18+years. Quote Link to comment Share on other sites More sharing options...
Conesmasher Posted January 2, 2006 Report Share Posted January 2, 2006 Our family has one child whom is one year of age. As a family, we anticipate that our child will be attending school in 17 years. This equates to 17 years of saving to have the ability to pay in full for our child’s education. This account is going to need funding for four full years of school at an in-state public university, such as Ohio State University. The current annual cost of Ohio State comes in at $5,000 for tuition, and $7,000 for room and board. We intend on covering the child expenses for tuition, room and board. The cost of books is going to incurred by the child as a learning experience to understand the value of money. Currently there is no feasible way to estimate the amount of financial aid available for the child. We do not know what type of income our household will posses, nor do we know if our child will have extensive availability to scholarships. The plan is to inform our child that a part-time job in the summer time is a necessity to save for the cost of books for the school year. Any money gained beyond that amount is going to be free spending cash for our child for whatever reason. As a family, we are going to have the need to posses an education nest egg that totals $115,754 at the time the child reaches 18 years of age (see cash flow analysis). This savings amount is based upon a 4.76% increase in tuition cost per year. The yearly contribution starting at $2,617 will increase at a rate of 3% annually, which is the adjustment for regular monetary inflation. The investment interest rate we expect to earn is a modest 8%. In order to save properly for these college costs, our family is going to save $50.33 per week and increase annually this amount by 3%. As a family, we feel that the 8% investment rate that we expect is realistic, as most index funds average from 10-13% in returns. There are three types of accounts that we can consider utilizing. The first plan of choice would be the 529 (non-prepaid) savings plan. This plan would allow for ease of transfer to the estate when naming the specific beneficiary. Because this is the non-prepaid plan, it will not affect the financial aid of the college aspect. The interest earned in the account is exempt from federal income tax as long as the expense is a qualified education expense. The qualified users of the account are any child that is attending school and they have the ability to be transferred to other children. Another important factor is that anyone in the family can contribute to the 529 plan. The second choice of investment for education would be the Coverdell IRA. This IRA may be passed through the estate with a beneficiary named on the account, however if the funds are not used for the intended education purpose, they will be taxed at the income tax rate. The only way that the financial aid is affected is through the net worth of the owner. The qualified user of the account is intended to be the student, if the student uses them for educational purposes, the account will not be taxed. The third and likely unused type of account would be a typical savings account. The estate implications vary by state. In the state of Ohio, an account beneficiary or P.O.D. (payable on death) can be named to avoid estate tax implications. Financial aid can and will be affected in terms of income and net worth of the owner of the account. There are practically no tax benefits for participating in this type of account. The interest income will be taxed at the regular income tax level. Qualified uses of the account are not limited to regular needs as well as education cost. **This is a little write up that I did for my Finance 430 class. I was assumed to have at least one child, and that's what I planned for. Below is a link that could help you visualize your dream for your child, above all, good luck. http://cgi.money.cnn.com/tools/collegeplanner/collegeplanner.jsp Quote Link to comment Share on other sites More sharing options...
Got-Boost? Posted January 3, 2006 Report Share Posted January 3, 2006 No offense to anyone on here since you guys are doing what you feel is best for your kids down the road but..... ....every kid I know that had a college fund was a complete idiot in college and pretty much pissed it ALL away. Every single person I know that has had to work hard to get through college and PAID for it themselves, did a lot better in school and has become a much wiser person IMO. Your really not doing them any favors giving them a hand out or at least letting them know it's there when they graduate High school. Keep it quiet until they can appreciate what they are working for and understand how to work hard and strive to get where they want in life. Then if they EARN a scholarship you and the wife can take the long awaited (kids have gone to college) vacation and get that little HOT ROD you have been dreaming about as you approach your late 40's! Quote Link to comment Share on other sites More sharing options...
iwishiwascool Posted January 3, 2006 Report Share Posted January 3, 2006 No offense to anyone on here since you guys are doing what you feel is best for your kids down the road but..... I know plenty of (now adults) that had school completely taken care of. Many did quite well and now are well adjusted adults. It all depends on the values indoctrinated in the punk. To say that paying for your child’s college is a recipe for failure is a gross underestimation in the power of positive culturing. Quote Link to comment Share on other sites More sharing options...
Akula Posted January 3, 2006 Report Share Posted January 3, 2006 I have Education IRAs, Savings accounts and 529 Savings (http://www.upromise.com). If you want some professional financial advice call this guy http://www.nmfn.com/danielneary and tell him Jason Kent sent you. (you will atleast get a free lunch out of it) Quote Link to comment Share on other sites More sharing options...
Got-Boost? Posted January 3, 2006 Report Share Posted January 3, 2006 I know plenty of (now adults) that had school completely taken care of. Many did quite well and now are well adjusted adults. It all depends on the values indoctrinated in the punk. To say that paying for your child’s college is a recipe for failure is a gross underestimation in the power of positive culturing. Of course that is NOT the case for EVERYONE. I'm just saying that was the case for pretty much all the rich kids that I knew from high school. A little dose of reality will give them a lot more positive culturing than a hand out, let me clue you! Quote Link to comment Share on other sites More sharing options...
smokin5s Posted January 3, 2006 Report Share Posted January 3, 2006 my kids will get off their lazy ass and work themselves through college like I did.... I will help them however I can, but with today's costs, no way will I be able to put that kind of money aside for multiple children. Quote Link to comment Share on other sites More sharing options...
Guest Luetic Posted January 4, 2006 Report Share Posted January 4, 2006 my kid would have to put their self thru college like I did. 18 = gtf out o' my house. Yes I could pay for it. No I won't! I'm driving the college fund! Quote Link to comment Share on other sites More sharing options...
Nitrousbird Posted January 4, 2006 Report Share Posted January 4, 2006 I probably shouldn't breed = won't have to save for child's college fund. Not like anyone saved for my college fund. Quote Link to comment Share on other sites More sharing options...
iwishiwascool Posted January 4, 2006 Report Share Posted January 4, 2006 I probably shouldn't breed = won't have to save for child's college fund. Not like anyone saved for my college fund. Even worse: When I was in high school I managed to make nearly 20k with which I planned to pay my tuition with. My Mother and stepfather then "Borrowed it" to buy a car. I never saw it again. I am still bitter each month when that FEDEDU shits pulls from my account. Quote Link to comment Share on other sites More sharing options...
GRN96WS6 Posted January 4, 2006 Report Share Posted January 4, 2006 Damn Ken that would suck and I'd be pissed off and probably would not be on speaking terms with them, are you? My dad paid about half of mine and I am paying for the other half. I think that was fair as it made me study harder and appreciate it more. I will try to help as much as I can but I know I won't be paying for it all. Quote Link to comment Share on other sites More sharing options...
Nitrousbird Posted January 4, 2006 Report Share Posted January 4, 2006 Even worse: When I was in high school I managed to make nearly 20k with which I planned to pay my tuition with. My Mother and stepfather then "Borrowed it" to buy a car. I never saw it again. I am still bitter each month when that FEDEDU shits pulls from my account. Man, if my parents did that, I would probably try to sue their asses, and never speak to them again. That's just f'ed up. Quote Link to comment Share on other sites More sharing options...
black00ws6 Posted January 4, 2006 Report Share Posted January 4, 2006 We don't have kids and not even sure if we are but I've already opened up a Roth IRA for their college fund.. So if we don't, then I'll still put in the max every year for it along with the max in my 401k. Quote Link to comment Share on other sites More sharing options...
Skinner Posted January 4, 2006 Report Share Posted January 4, 2006 with 3 on the way they will be on there own for college. Quote Link to comment Share on other sites More sharing options...
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