I’ve been thinking about how I’ve slacked off on various money related things these days. I’ve set so much on autopilot (which is good, for savings, paying bills, etc.) but then I sort of forgot to check in on or change anything. Which meant that, when my daughter was born, I didn’t bother opening up any savings accounts for her. This seems sacrilege for someone who had been obsessed with being so on top of thing with personal finance for so many years! I think I let my confusion about the process get in my way of just doing it.
So, one day, I tweeted about how I still hadn’t opened any savings accounts (specifically a college savings account) for my 2+ year old daughter, seeking out advice and pointers. A few recommendations came in that we should go with Vanguard, and Chief Mom Officer sent me a link explaining the Massachusetts-specific 529 option (part of a bigger site that gives explanations of all the 529 options). I even came across this great introduction for college savings options from the SEC.
But the one thing that really kicked me into high gear was the pledges from @LazyManAndMoney, Evan (@MJTM), and Stephanie Kibler (@stephonee) each for $25 if I opened up a 529 within 3 days. FREE MONEY? I’m in!
I checked out the Vanguard site for what options were available. Turns out you can technically open a 529 from any state, but you’ll only get extra tax benefits (like deducting your contribution amount from your state taxes) if it’s YOUR state. (You still get the regular tax benefits of tax-free growth of your investment and tax-free withdrawal for qualified education expenses). The main option from Vanguard appeared to be The Vanguard 529 Plan (sponsored by Nevada). I’ve always heard good things about Vanguard, and I liked the looks of their low-cost fund options, but I was a little taken aback by the initial $3000 investment requirement. Though they point out that if you want to still invest with Vanguard but start with a lower initial investment ($25) you can open an account with College Savings Iowa 529 Plan.
So, after looking over the options from Vanguard, we ended up going with the option from Fidelity for Massachusetts (our state of residence). It allowed us to start with a low initial investment of $50 (just to get things started), and we can do automatic investments of $15 per month or $45 per quarter. My husband and I are still talking about how much we want to set up for automatic investments, but it’s good to know we don’t have to start with a ton of money right at the beginning. Plus, we get to deduct the contribution amount from our state taxes (which doesn’t amount to much, but, hey, every little bit counts!)
So, we opened an account! And funded it with the initial $50. And will sit down this weekend to discuss exactly how much to contribute each month. AND! My twitter friends stuck by their pledges and sent $25 each! Now I have to figure out how to transfer money from PayPal into the 529…
Have you started saving for your kids for college? Why or why not? What did you end up doing? I look forward to hearing your feedback!