Helping kids save for college
Comments(4) I read somewhere that poor people think about surviving day-to-day, the middle class thinks check to check and the wealthy plan for generations down the road. So what are you doing to ensure your future generations will have a stronger financial life than you did?
The thing I decided to do over the weekend was start college funds for the babies in the family. I have one newborn little cousin and one who’s three; they’ll both be getting 592 college savings plans in their names. I called up a financial adviser at Fidelity, where my sons’ college plans are and found out that anyone can start a 529 plan for a kid — you don’t have to be the parent. You can start one with as little as $50 and some of the plans allow you to deposit as little as $15 automatically per month. Sounds like a little, but even that much over the course of 18 years will add up to at least books for a semester or two.
Most 529 plans are associated with or sponsored by a state — you don’t have to live in that state to enroll in them, though, and all have federal taxes deferred on them. There are some state tax benefits, too, but you’ll need to read the fine print on which plan you choose to figure out which is best for you. You can go to www.savingforcollege.com to read up more on 529s.
We started a college savings plan in the Monetta Young Investor Fund to take advantage of the annual $1,800 tax free amount in using a custodian account based on the Kiddy tax. This fund has age-based investment kits and activities for the kids. I plan to use a 529 plan after I accumulate about $15,000 in assets for its tax benefits.
After you open a 529 College Savings Plan you can attach it to Freshman Fund to give friends and family the ability to gift into the account instead of or in addition to the usual birthday gifts.
Louisiana has the START program which gives you free classes on 529s and how they work. It’s two or three years old I think and catching on pretty well.
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