Let's say you had an extra $350 a month to put into college savings...

[melissel]

Where would you put it? I'm so disappointed in the state of our 529 plan at the moment. We started it for DD7 about 6 years ago, and looking at the current balance, I might as well have stuffed the money in my mattress. It has not grown by anything except what we've contributed monthly :(

 

So now we're in a position to put some extra money away (sort of) for college, and I'm a bit gun-shy about the 529. I know some people don't think 529 plans are the best college savings vehicle. In your opinion, what WOULD be the best place for this money?

 

And just for a little extra fun, we could also use the money to renovate our 1965 kitchen with the original, hazardous oven (and separate cooktop), 1970s fridge that's slowly but surely giving up the ghost, and pointless cabinetry, or to save for retirement. I'm prioritizing college because that's only 10 years away, while retirement is at least 30 years away, and it's likely I'll be going back to work by the time the girls are off to college.

 

So, given this extra $350 a month, what would you do?

[hana]

I think most financial folks would say to build a solid retirement nest egg first before saving for children's college. I hear your reasons to do otherwise, but still, I think the retirement piece is more important.

[MorganClassicalPrep]

Is this $350 after the children's extracurricular activities? If I had an extra 350 a month, that would be the first thing I'd add, since DD wants to do a couple things we can't afford right now! :D

 

But given a choice between renovating, retirement, and college... why not split it up? I'd probably do something like, 200 towards renovating (since that would be closer and cheaper!), 100 towards college, and 50 towards retirement. Then once you get the renovations done, I'd do something like 200 to college and 150 to retirement. That would allow you to build up a nest egg for both. (And if you put 200 a month towards college for 10 years, even without ANY gain, it would be $24,000. At the end of the 10 years you'd have 18K for retirement, plus another 20 years to save. (minus whatever it took for renovating the kitchen! :D)

[Mommyof4ks]

We went to Edward Jones and had our financial adviser lay out our options, and we decided on a strong mutual fund. It has been very good to us even during the down turn. The best thing is that we can use that money for anything, so if the kids decide to start their own business or something else then there is no penalty for taking that money out for start up costs, down-payment on a house, or whatever.

[kmacnchs]

As far as I know, you do not have to use YOUR state's 529 plan. You can pick a state with the best one and invest in its 529 plan. We are in NC and I think our 529 plan for our kids is an Iowa 529 (my parents set it up)...

[StephanieZ]

Well, I think I'd do the kitchen. LOL.

[melissel]

Well, I think I'd do the kitchen. LOL.

 

You do not know how hard it is not to do that right now! The reason we'll have this money is that we're refinancing at a great rate through DH's company. Even if we cashed out enough to do the kitchen we'd still do "well," financially...but we just can't do it. We got out from under our CC debt just a year or so ago, and neither of us wants to go back under the bank's thumb for anything other than our home!

Edited August 8, 2010 by melissel

[Amy loves Bud]

I'd take that $350, save it for a year and use it for a down payment on a rental house. Then add that $350 plus rental income toward paying down the mortgage as quickly as possible, with the goal being a paid for rental house by the time she starts college. You could then sell, or just use the monthly income to pay for college expenses.

 

If you can get by with just using rental income (by paying for some with scholarships and jobs) then it will be a source of revenue for both college and retirement.

[melissel]

I'd take that $350, save it for a year and use it for a down payment on a rental house. Then add that $350 plus rental income toward paying down the mortgage as quickly as possible, with the goal being a paid for rental house by the time she starts college. You could then sell, or just use the monthly income to pay for college expenses.

 

We're in New Jersey; there's no way that would be feasible :( With bigger amounts, we could do it. This is why I keep trying to convince DH to move!!!

[duckens]

1)

But given a choice between renovating, retirement, and college... why not split it up?

:iagree:This sounds like a good idea!

 

2)If you are looking for college savings, here is another vote for Iowa's 529. The advice given before about choosing another state's plan is accurate. For example, you may live in North Carolina, choose the Iowa plan, and send your child to college in Oregon! We get a tax credit on our state tax return because we are Iowa residents. I'm not sure what the rules are if you live in a different state.

 

As for the specifics of the Iowa 529 Advisor Plan (Franklin Growth Portfolio, Aggressive), we started it when dd was 1.5yo. She is now 3.5yo. Because she will not be going to college for several years, we chose the "high risk/high return" category. We will move to lower risk when she is 13 or 14yo.

 

We add money every year, and we have had nearly 20% increase each year. (Remember that the stock market tanked as soon as we put money in...and we still had nearly a 20% gain that year!)

 

3) Unrelated rant:

At the same time, my father was handling some college money for all of the grandkids. There had been a group fund (just in a general mutual fund) for all of the grandkids set up by my grandmother. It had been up to $80K for 5 grandkids to split. When the stock market tanked, dad sold EVERYTHING at a 50% loss!!! :mad::mad::mad:

 

(This is also because my brother has started raiding his son's college funds to pay for preschool.)

 

I told him that we wanted dd's share reinvested....IMMEDIATELY!!!

 

I told him that statistically, if you stay in the stock market for a 10year time period, you ALWAYS HAVE A GAIN, even in the depression decade of the 1930s.

 

I told him that the government will help the market because of the retirement savings of the general populace in the market.

 

I told him that Warren Buffet (his hero) was buying stock like crazy at this time.

 

Nope. The college money still sits in a plain boring savings account....other than the amount spent on my nephews' preschool and kindergarten at the local Christian school.:banghead::banghead::banghead:

 

Dad has hinted at distributing the money after our Thanksgiving baby arrives (who is the last grandchild). We'll see.

[Mom0012]

Well, we recently switched from a 529 college savings account to a 529 prepaid tuition account. By doing this, I feel I can at least guarantee my children a college education at a state university. If they do really well and want to go somewhere else, I can take the money out and put it toward the college of their choice or use it for their sibling. At this point, I cannot see us being able to afford a private or out-of-state college anyway unless there was a substantial scholarship involved.

 

We did this for my sdd when she was 10 and paid about $18 for 4 years at the state university. Now, tuition at the colllege closest to us is $8 k a semester (it was $1200 a semester when I went there myself 20 years ago), so we really got a bargain with her. I wish we had had the money to do that for my kids at the same time so we could have locked in those rates.

 

Lisa

Edited August 8, 2010 by LisaTheresa

[plansrme]

Not now, but by the time your oldest starts college, if you add this to your mortgage payment?

 

That would free up a big chunk of cash to help college on a pay-as-you-go plan.

 

I think, though I am not 100% sure, that having a paid-for house does not affect your eligibility for financial aid the way having the savings in cash does.

 

Terri

[suzf242]

I would buy silver, and keep my eyes open for a good rental. You never know when you might find a foreclosure or something cheap goes up at an auction.

 

Take care,

Suzanne

[mrs.m]

I'd start investing for retirement first. If you start now then it will compound faster. It isn't much help for your children's future if you haven't taken care of yourselves and they have a future burden. If you can do something, you should! What if something happens and you can't go back to work? Or your DH needs to retire early?

 

At the very least, split it in half giving money to both funds.

 

Just my 2 cents.

[Sebastian (a lady)]

I'm wary of these because I think a state could pretty much change the rules at any time as long as you get back what you have paid in. In other words if tuition really outpaces inflation or the return on the investment, I don't think there is much to keep the state from ending or substantially altering the program.

 

And of course, for us personally, we're too mobile for me to pick one state where the kids are likely to attend college.

 

Honestly, we put our extra money into savings and then pull it out occasionally to put into either high yield CDs or money market certificates. We aren't locked into spending the money for college if another need comes up. They money isn't locked into one child or another's account. And (at least at the moment) financial aid reviews seem to think that a student should be spending most of his savings for tuition, while parents are hit for a lower percentage of assets. (Meaning if I have $1000 in the bank and my son has $1000 in the bank, a college will expect that I spend something $50 of the savings on his college while he would be expected to spend something like $200 dollars of the savings on tuition. Formulas change all the time, but here is a general explanation that I found. There has been a lot of discussion of financial aid and tuition costs on the high school and college boards. Eye opening stuff. I'm not looking forward to wading into that reality for a while.)

 

[NB: One final note. Because of our particular financial situation as a military family, there weren't really tax benefits to our using a 529. So for us, the considerations are all about potential return and financial aid, without considering how it might save on taxes. YMMV.)

Edited August 8, 2010 by Sebastian (a lady)

[Mom0012]

I'm wary of these because I think a state could pretty much change the rules at any time as long as you get back what you have paid in. In other words if tuition really outpaces inflation or the return on the investment, I don't think there is much to keep the state from ending or substantially altering the program.

 

 

 

Yes, honestly I am always wary of all investment options. There is always a certain amount of risk involved. I have felt fairly comfortable with the prepaid tuition plan in Virginia because my sdd is in college now, tuition rates more than doubled since we invested in the original plan, and the college is honoring the agreement and it's working out to be a great deal.

 

One of the things that has concerned me is someone on this board posted about being charged an exhorbitant amount of "fees" each semester. I don't remember what state or school it was, but the fees were some ridiculous amount like $800/semester. That's the kind of garbage I could see the school pulling, but I still feel that if they start doing things like that, at least the tuition will be covered and we will be that much better off since we'd still be charged the fees even if we didn't have the tuition plan.

 

I'm just hoping for the best.:)

 

Lisa

[SapphireStitch]

No investment ideas here, but I suggest you set aside some money to replace at least the refrigerator as soon as you can. Newer fridges are much more energy-efficient than the old ones...you might be able to free up some extra each month to put in the college fund by saving on your electric bill.