I know most people here like to use 529s for college savings for LOs.
If you already had $500 going into a 529 from relatives in your LOs name, how much more would you put in or is it better to use a different savings vehicle?
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Depends on what your goals are. We are trying to estimate how much college will cost at that point, and then work backwards to determine how much we need to put into the 529. It's important to not overshoot it though because that money can only be used for higher education.
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If I had 500 a month going in from other people, I would dance for joy and go buy some shoes!
I actually agree with @JoJoGirl: to estimate and work backwards depending on the type of school you want LO to go to but not to overshoot. You can always save additional funds in another way that won't limit the use as much.
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We put in about $10k a year. So, that would be a little over $830 a month.
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@JoJoGirl: @Mrs. Blue: Yup, that is the thing, I am a bit worried about overshooting. It just seems so impossible to figure out what it will cost the future. I should probably just consider saving additional funds in a different way.
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@littlek: thanks for the ball park, that helps give a good idea.
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@JoJoGirl: It was my understanding that some 529 can be used for other education (tech schools, etc). I know there are ton of different types of plans but if you are worried maybe look into it a bit further.
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@T.H.O.U.: I just mean it has to go toward *education* in general, ie we don't want to have money in there that could have potentially been invested in retirement, and then not need it.
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@plantains: We are looking at alternative methods to save for LO's education. She does have a 529 but we are thinking of saving more in an IRA. I have to get one since my current employer doesn't have a retirement plan and with an IRA you can pull out money for education without a penalty.
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There are calculators to help you figure all this stuff out. Ours said $800/mo per girl.
We are also able to use my retirement as a savings mechanism, but only because I will conveniently be old enough when our oldest becomes a junior in college.
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@mrsjazz: @Mrs. Jacks: I didn't realise you could use IRA space to save for college. That is an interesting option. Perhaps I could consider my Roth as additional college savings.
It is really hard for me to figure out how much because we might be living in the UK at that point and college costs significantly less there so who knows?
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What I would do depends on your overall financial picture. Do you have other debts that it makes sense to throw everything you've got at? Are you adequately saving for retirement now? Are you maxing out your retirement contributions? If yes (or no, as applicable!) I might not put any extra into the 529 while your relative puts in $500/month.
If you're already saving for retirement, are financially stable/comfy, I would continue to still put money into the 529 on my own, since you never really know how long the relative's contribution will last. I'm not worried about putting too much in, because college is so dang expensive.
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@plantains: LO is a Canadian citizen so we are going to strongly encourage her to go to college there
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@Mrs. Jacks: @littlek: so $10k/year per kid... so by the time they start college, you'll have $150k-$180k saved up? That seems like so much!
Right now, we don't have a 529 plan yet, but we're setting aside $100/month for savings... I think our kids will end up going to a state school (well, that's what we'll pay for) and if they decide to go private, they'll either need to get scholarships, grants, or loans.
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@HabesBabe: I want to pay for all education they need. Which means more than a 4 year degree. We want to be able to pay for med, law or MBA.
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@littlek: @Mrs. Jacks: We're doing the same . . . I would LOVE for LO to be able to walk away with an education debt-free. I came out relatively unscathed compared to my classmates, but still, the loan repayment is a huge financial obligation/burden!
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I looked up what it would cost to attend the school that I attended (it cost about $100k 20 years ago). Same school, same education, $250k.
My son is also a dual citizen and I joke that he would have to attend school abroad, but really, it is a possibility. There, the only cost is room and board and we're talking less than $20k.
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@yoursilverlining: Good point. We probably need to stit down and do soem proper estate planning to make sure that we are properly tax advantaged first before I change anything.
@JoJoGirl: @looch: I hope LO can get on the go to college abroad train, it will save us so much!
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@littlek: oh wow, that's great! but what happens if your LOs go into a trade, or if they start their own businesses, or they simply don't want to go to school after high school? Would you just take the penalty and use the money yourself, or would you still give the money to LO?
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@HabesBabe: LO not going to college isn't an option. In the area we live you pretty much need an advanced degree. Everyone we know at least have masters.
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@littlek: this is true for us too.
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@Mrs. Blue: Haha @ dancing with joy!
This post gave me more motivation to save more for LO. We are saving around $200 a month with an annual tax refund deposit and now I want to bump it up. We are expecting to pay a portion, not everything. DH wants to pay it all. Gulp, what if she goes to med school though?!! We're doing similar to what Mrs. Jacks is doing. -
@littlek: So what if, on the other hand, LO gets a full ride to the 4-year of their choice and you only have to pay for their MBA? I'm just wondering what people's back up plans are if they end up putting "too much" money into one of these plans (which is a nice problem to have!).
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@HabesBabe: you can take it out but there's a penalty.
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Like @littlek: not going to college is pretty much not an option for our kids. HOWEVER, my husband is crazy athletic and got a (mostly) free ride to college to play football. On the off chance that one or some of our kids are also gifted enough to received extensive scholarship money either for athletics or academics I don't want to be stuck with hundreds of thousands of dollars in 529s and no higher education expenses to use it on. So we plan to save about 5-7K per year in 529s, and then we also save extensively for her benefit in a general investment account. It doesn't have the tax advantages of an IRA or a 529 but it has much more liquidity. Using retirement accounts to save for my LO's college isn't a good option to me. You can only contribute a max of $5,500 a year into an IRA and I want that money to be for my retirement, and my retirement alone.
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@HabesBabe: If the 529 does what it's supposed to do and grows at a good rate of return by the time LO goes to college it should be much much more than 150K-180K. But I recently read an article that suggested that if you want a baby born this year to go to a 4 year private college it's not unreasonable to expect that it will cost $500K!
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@MamaMoose: I just can not get comfortable with the cost of a 4 year degree being half a million dollars! Seriously, though, I would question the degree being worth it.
Do I think my degree is worth $250k? Not at all.
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@looch: I know. I almost had a heart attack when my partner sent me the article. My immediate response was "well, M's not getting a sibling then!"
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@MamaMoose: I like your way of thinking (spreading the savings between a bunch of different types of accounts) and we'll probably do something similar. I knew that the 529s would grow to more than the principle, but didn't feel like figuring out the math
I think our plan is to cover tuition, books/supplies, and housing (living with us) for a 4-year state school, so we definitely don't need to save $500k! LOL
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@looch: I struggle with this, too! If a Bachelor's Degree will cost half a million dollars, I don't know if I'd push for my kids to get one!
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I am hopeful that my girls go to our local University where I get half off tuition. If not, maybe we can work some academic and sports scholarships
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@Mrs. Jacks: A sports scholarship would be awesome! Too bad my son is so uncoordinated. He's kind of starting to look like the stereotypical math nerd...uncoordinated, always reading books, loves numbers. I'm hoping he gets in with some sort of math scholarship!
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@banana: academic scholarship is great too!
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@Mrs. Jacks: There seems to be so much more competition with academic scholarships! Maybe I should have choose a really unpopular instrument (like the piccolo) and start lessons early so that he can get in with a band scholarship! How much competition can there be for a piccolo scholarship?
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@banana: I struggle with this too, it just doesn't seem feasible to me. @banana: @Mrs. Jacks: any kind of scholarship would be great. I'd rather them have too much in the 529 than not enough. Having extra to put towards grad school would be nice.
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@plantains: Yes, I'll take any and all scholarships. I'd be proud if my daughter got in with a cheerleading scholarship! My cousin's daughter recently did that and it's pretty awesome!
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@banana: LOL, I played piccolo in high school. And actually, all piccolo players start out as flute players and that's pretty much the most popular instrument to play.
I would never want my kids to get a sports scholarship. It is a HUGE amount of pressure to play sports and go to college, especially if it's a D1 school. It's basically like working two full time jobs.
I just figure we'll save what we can. I'm confident that we will be able to provide some type of education, it just may not be a top tier private school. I kind of feel that those schools are a waste of money anyways, especially for undergrad.
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@ShootingStar: How cool! I actually really like the piccolo. Easy to carry and such a cute sound.
Ok I'm going to start off my kids on flute then! And then urge them to try the piccolo! Piccolo scholarship, here we come!
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@banana: Just FYI: girls' rowing teams have hugely under utilized college scholarships. That's my plan for my future little girl if she's not otherwise on her way to earning any other scholarships!
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@ShootingStar: Sports scholarships are amazing if a child is talented enough to earn one! A friend of mine played baseball at Stanford and received both an athletic scholarship and an academic scholarship. I cannot imagine any better oppotunity. I think that being on a sports team in college is such an amazing experience. A team of any kind, really. The camaraderie developed translates into great life skills as an adult. Just my two cents! Don't totally discount athletic scholarships!
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