Saving For College Options

[twinmomma]

I'm trying to figure out the best way to start putting some money away for my kids for college. I'm admittedly way late to the game. My girls are 11, so I don't have a ton of time to save for them, but I figure something is better than nothing at this point. Between paying off my own loans and then going through a divorce, this is when I'm finally stable enough to make it a point to set aside money every month. 

Is a 529 plan still the best option at this point? Do I just open high yield savings accounts for each of them and funnel money there? 

I'm curious what the best options are given how short a time frame I have to accumulate anything. 

I'd likely be putting away around $100 a month per kid, if that helps. 

[Poppy]

Yes, I think with 7 years, it will be better to invest than do a HYS. I would do 529. You might want to move it to more conservative funds starting a couple years before they go.

[plutosmoon]

I am a financial aid advisor at a college, I like 529 plans for college, it's what I use and recommend at almost all ages. I use age based rebalancing, which auto adjusts my risk level. You may be able to get a tax credit from your state for contributing. I put $1000/year into DD's for the state tax credit, the catch is it had to be my states plan, fortunately MEFA is pretty decent. I also have a generous tuition benefit, so I am careful about putting too much away.

There are other strategies families use to help maximize aid, like using Roth IRAs since you can pull the principle without penalty and retirement savings don't count in aid formulas. Most families don't have enough savings to need complex strategies like that and 10-20k in a 529 isn't going to move the needle much on an aid award.

[dutchgirl678]

I'm even later to the game, my kids are 15 and 12 and I have never had a 529 for them. I currently put $50 a month each into a HYS and have about $10k in a CD, which is a drop in the bucket.

[goldengirlz]

Another vote for a 529.

My company had an event a few years ago for parents looking to explore college savings options (we do this every so often — bring in a financial advisor for a lunch-and-learn.) I don’t remember all the details, but my strong takeaway was that a 529 provides the most flexibility and is our best bet for various reasons.

[ellipses84]

I think the 529 plan is the best option. You can do one and if the first kid doesn’t use it the second one can… not sure how that will work with twins going to college at the same time though. If you want to be equal you can set up two accounts and contribute equal money. I recently posted an article on MM about how the rules changed and now unused funds can be transferred to an IRA for the child once they are an adult, so there’s no wasted money. If they don’t use the money for college it will grow exponentially by the time they retire. You can also transfer it to another relative, like a first cousin.

I got a notice about a $$ bonus if you set up an account with $1000 by the end of September, but that’s probably specific to my state plan. If you can put in a lump sum that’s great because the more you put in sooner the more it will earn. Also don’t feel bad if you can do much to start. $25-50 a month is better than nothing and will add up, then increase it as you can. I don’t have a ton saved for my 12 year old and don’t have an account for my 7 year old (although I’m going to start one due to the new IRA rule). We are like $3k from finally having all of my and DH’s student loans paid off and I was more focused on my retirement, because you can borrow for college and not for retirement. I’m not sure if you can set contributions to automatically increase each year like you can with a 401k.

[mae0111]

We also have 529's. We set ours up through Fidelity, but Vanguard is probably better.

We are staying with Fidelity because DH has a credit card that he uses for all business-related expenses (travel, office equipment, laptops when needed, etc.) that contributes 2% of all charges to the kids' 529 accounts. It's not as much as it used to be before COVID (he traveled every week) but it's still something.

[Susie]

We do 529's, with age-based investing which will get more conservative as they approach college age.

In NY, there are state income tax deductions available for contributions to NY's 529 plan, so we do that.  Returns have been > the 4.5% or so that we are currently earning on a savings account, plus every little bit helps when it comes to reducing income taxes now and taxes on the growth later.

[twinmomma]

Thank you all!
Sounds like 529 is the way to go, so I'm going to reach out the HR department at work about it. I know that's an option for us (no match or employer contribution or anything) so I'll start there.