Saturday, February 2, 2013

Baby M: Going to College!

Baby M is only four and a half months old (well, six weeks corrected) and she now has a college savings fund.

This has been on my to-do list for a while, but, well, I've had other things on my mind - like helping her learn to breathe and eat.

At any rate, I did some research, mainly based off of Trent's very useful 529 posts at The Simple Dollar (specifically this one and this one). Our state's plan is at least as good as Iowa's, plus the fund I chose has a lower management fee. It has all the benefits that Trent looks for, such as:

  • Money grows state and federal tax-free if withdrawn for education. 
  • Can be used for more than tuition. 
  • Beneficiary can be changed, and more than one person can contribute. 
  • Maximum contribution might as well not exist, it's so high. 
  • Minimum contribution is low (ours was $25, we started with $100). 
  • Easy online access. 
  • Account ownership can be easily transferred. 
  • Doesn't apply to schools only in our state; Baby M can go to any accredited institution. 
Plus, it has a target-date fund option, which invests aggressively while Baby M is little and grows more conservative as she gets older. In many ways, that makes it a "set it and forget it" investment plan. Once we get regular monthly contributions going (soon!), we won't have to think about saving for her college fund - it'll be automatic. 

Peanut and I have talked in depth about how much assistance we want to give our child(ren) in college. My parents paid for my undergraduate tuition, room and board in its entirety; Peanut had to take out a lot of loans to finance his education. (My loans were all for graduate school.) We would like to do something somewhere in the middle for our kids: make it easy enough that they don't have to work full time while in school or graduate with a crushing debt load, but require them to pay some of their own way in order to feel ownership over the process. This fund is the beginning of providing some assistance down the road. 

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