My wife and I decided when we had kids that it was important to us that we start investing (saving) money for our kids so they would have access to some funds when they finally went off to college. We opened 529 accounts with our financial institution and started setting aside money for them as soon as they were born.
I think this is important since college is already so blastedly expensive if you go straight to a 4-year institution, and since my wife and I could afford to set some money aside for them we felt that it would help them. I don’t want my kids to have to go into debt for an education. That isn’t what education is supposed to be about. (maybe I will write about what I think college should be about sometime…)
So over the years we have invested in our kids’ futures. I think it is important that our kids work and earn money to pay for things like college and their time at college, but I don’t want them faced with the dread of debt. I hear too many students every semester at the community college talk about how they are going to pay for school once they get to the university. I hear most of them say something along the line of, “I will just take out loans.” There is little to no hope there at all. They expect to be in debt for a large chunk of their lives due to college.
The 529 was designed to be a place for people to invest for someone’s future education costs. And that is exactly what my wife and I intend for that 529. These funds can be used for a myriad of things regarding education like tuition and books, but also things like room and board. So the funds have a lot of reach. The funds are also being invested in the global market. So, they don’t just make interest, but they are moving with the market at hand. This may scare some people, but in all honesty the market trends upward, and if you start early then you are likely to be ahead of the game when your kid gets to college then you would have been otherwise. There are lots of options on how to invest as well. Personally ,we have made it simple and done a dated fund that starts off aggressive and will tapper off the closer our kids get to college. It has done quite well (up 30+%) and that is much better than a bank, and they get to use it tax free for college expenses.
One issue that was always mentioned was, “how much to invest?” Because if you put in too much and your child didn’t need all of it then that money was “lost” funds. There were ways to transfer it to another family member without penalties, but again, of that child didn’t need it, or it was your last kid in school, then the money was “lost.”
Until now. There has been a significant change to the 529 recently. It was recently announced that someone with a 529 with unused funds could convert the remaining money in that 529 into a ROTH. That is huge. That means someone would have a jump start on a retirement account. Investing for retirement is something that many people don’t think about early in life. I was blessed to have a father that I worked for that made sure I had a retirement account from the start, but many people don’t have that. But now I know that my kids, no matter what happens in college, will not have to be concerned about spending the money in the 529 if they don’t need to. If they get scholarships, spend time at the community college, decide to go overseas (where college costs are typically a lot less), or even decide not to go to college at all (who knows), they will now have funds that are invested for their long term future.
I must say that this change is a great thing. I hope the word on this gets out because I think everyone that wants to invest in their kids, their friend’s kids, their grandkids, etc. should strongly consider doing a 529 investment. Go to whatever financial institution you use and ask about a 529. Start as soon as you can. And invest whatever you can. It may be little, or it may be a bunch, but remember you are investing in your kids and their future education. With some of the institutions, like the one we use, there are easy ways for others (like family) to send funds directly into that person’s 529. There are even hyperlinks you can post places. Talk about easy. Your kids can invest into it if they want to. Once they have bank accounts they could transfer money directly into it if they so chose to. Or they could hand you cash and you then transfer the money into the account. But the point is that they could get in on it as well.
So look it up. Your kids (or grandkids) will thank you.