Elsa is saving for college using a 529 plan. Right now she is considering some Ivy League schools... but she is not sure what she is going to want to do in 17 years, so she'll probably not sign any letters of intent just yet (sorry recruiters). Strangely enough, a 529 must be sponsored by a state and a person does not have to use the plan inside their state - in fact, it appears better to use another's state's plan such as NY, UT, or IA. Elsa uses the NY plan which invests in Vanguard funds. The only issue we have had is only the account owner can contribute... um... hello, what about the family that wants their little cherub to attend Harvard? Anyways, other than that, it works out pretty well. If a person is not "into" investing, it is pretty easy because there are only, like, 12 fund options.
If parents want absolute control over where the money is invested, a good place to start is a Coverdell ESA. A Coverdell is also good if your child will attend private school; then, of course, you'd have to buy the little, yappy, white poodle and a big black SUV with tinted windows... where was I, oh yeah, you can use the money tax free for K-12 and University. The only issue a person (more wealthy than us) might have is the $2000 contribution limit. Then again, the first $2K can go to the Coverdell ESA and the other ten grand you have lying around can go in the 529. ; ) The minimum contribution to start the NY 529 plan is $25; I don't know about the others.
You may want to read what Clark Howard has to say on the topic. He is pretty up on the investing thing.
No comments:
Post a Comment