Can we talk about college funds?

Discussion in 'Teacher Time Out' started by Mrs. Q, Feb 3, 2009.

  1. Mrs. Q

    Mrs. Q Cohort

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    Feb 3, 2009

    One of my major concerns before my (1 yo) son was born was that I desperately want him to have a college fund, so that he doesn't have to worry about going to school, ever. DH joined the military just because he couldn't afford to go to college and it drastically changed his life.

    BUT, I have yet to start anything b/c I'm SO confused by all the options out there, and no one I know has much insight. Texas already has two 529 options, but now they've started a prepaid tuition plan. Enrollment for this year ends Feb. 28th.

    Can any of you who know about this stuff check this out: https://www.texastuitionp...ation_07-09-08-124730.xml and let me know what you think??

    I guess it would just be a less-risky option, right? Because there's no investment involved, you're just pre-paying the tuition. Is that a good or bad thing? I know the economy is horrible right now, but my son doesn't graduate for another 17 or so years. Still, I'm leery of portfolios and the such, just b/c I'm so clueless.

    Anyway. What are you all doing?? And someone tell me what I should do!! haha ;) Our income is stable for now, we're working on paying off our debt, and I would really like to be able to get something started while my son is still young. Thanks for your help!!
     
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  3. Suburban Gal

    Suburban Gal (formerly Elizabeth) Banned

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    Feb 3, 2009

    The link you posted doesn't work.

    Anyhow, the G.I. Bill is opening the spouses and children later this year. The military needed to find another way to retain its servicemembers so they're opening it up. I don't know if it's temporary or permanent though and if it's something permanent that could be repealed later on down the road.

    Anyhow, the G.I. Bill COULD be an option for your son later on.

    The only negative to a pre-paid college account is that it's only good for use in that state. So when your son grows up, he's much more limited in his choices as to where he can go. If he wants to go out-of-state, he won't be able to do that.

    If you want to start a savings account for college, I recommend opening one at a bank and putting money in an interest bearing account whenever you can divert some money to it. Or, you could open up an 84-month CD. When it's up in 7 years, just renew it for another 7. When that's up go for 36 month (3 year) or 48 month (4 year) CD. By then, you should have a nice pile of cash for him. Or, you could also invest in some Wells Fargo Mutual Funds. My mom and uncle opened one for me when I was about your son's age and just let it incur interest over the years. Believe me, it'll grow — especially if you deposit money in it on a regular basis. By doing one of these 3 options, your son will be able to have money to use even for an out-of-state college or university.

    I was lucky, I received financial aid so my Associate's degree was 100% paid for. My Bachelor's wasn't completely covered by financial aid, but MOST of it was. When I finish with my Master's that too will be 100% covered by financial aid.

    The key to getting loads of money for college is , obviously good grades. The other component is doing really well on the entrance exams — ACT and SAT. We just had a kid at Huntington who received an additional $20,000 for college all because he raised his ACT score by 6 points! It went from a 22 to a 27. So, their $1,800 investment in our ACT/SAT program turned into a net gain of $40,000, which should cover his Bachelor's in its entirety.
     
  4. Mrs. Q

    Mrs. Q Cohort

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    Feb 3, 2009

    Thanks for the input. :) I, too, have had my college paid for through scholarships and financial aid. I graduated 4th in my class and unfortunately by the time I graduated high school, my mom was a widow so I got a Pell grant in addition to my scholarships. I've never really had to worry about paying for school.

    My DH on the other hand struggled all through high school, and his parents made way too much money to qualify him for financial aid. However, they refused to pay for him to go to college.

    I'm just trying to cover all the bases so that the money will be there, if my son needs it.

    I forgot to mention - if possible, I would like for him to be able to use the money even if he doesn't go to college. Maybe in that light, a savings account/CD IS the best option for us?
     
  5. Suburban Gal

    Suburban Gal (formerly Elizabeth) Banned

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    Feb 3, 2009

    Yes, I agree — especially since the prepaid option would most definitely have to be used for college.

    What I'd do is research the interst rates on everything (the savings account, the CD, and the Wells Fargo Mutual Funds). Find out what interst each would be drawing at this time. The savings account will probably draw the least amount of interest. The CD will draw slightly more in interest than the savings account, and the mutual funds will darw the most in interest. So, if you want to really stock pile some serious cash, the CDs or mutual funds would be the route to go.

    There is a downside to the CD route though. Once you make the minimum deposit (whatever that is; usually it's $500), it;s locked in there. You can only deposit money at maturity. However, the nice thing about that is he can roll it over at 18 into a savings or checking account at the bank it's in and then have immediate access to it whether it's for college or something else.

    With a savings account or mutual funds account, he can deposit money at any time just like you and hubby. (Remember, these accounts will be minor accounts.) Now, there's two MAJOR differences in regards to these options. He, like you and hubby, can withdraw money at any time with a savings account. Witha mutual funds account, he isn't allowed to withdraw any of that money UNLESS you and/or your husband authorize it. So while a savings account COULD be depleted by your son, the mutual funds account will be much harder for him to deplete.
     
  6. bballlady

    bballlady Rookie

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    Feb 3, 2009

     
  7. Blue

    Blue Aficionado

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    Feb 3, 2009

    Just be sure to do something. You can usually change the plan later, but don't just wait and do nothing.
     
  8. Rebel1

    Rebel1 Connoisseur

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    Feb 3, 2009

    Mrs. Q,
    You want GREAT advice, check out the Dave Ramsey show or get on his website. You can also call him on his show and he will answer your question. He's been there, done that SO he will not give you any run around on what you need to do. In fact, I'll check out the info we got, and I'll key you his contact info, tomorrow, if you'd like to check it out.:cool:
    Good luck,
    Rebel1
     

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