Saving for College questions...

[conorsmom2000]

I'm wondering if there are any banking guru's out here....:blush:

Mike & I have a savings account for Conor, but haven't yet opened a "real" college savings plan. Last year my Dad gifted each of his grandchildren with stock, which he wanted us to sell and use for some type of college savings plan. I finally sold that stock, which netted around $3,000 - but, I'm not sure what to do with it. I've been reading up on 529's, but I find the info quite confusing. My friend, who's Dad is an accountant, said he opted not to open a 529 for her daughter as there were "too many restrictions". :confused: I also know there are Education Savings Accounts, but I'm not sure if they are better than a 529. I know I should probably sit down with a financial planner, but honestly, I don't even know where to start.

As a side note, my BIL (Mike's Brother) works for Merrill Lynch. We are not very close to him, but he did open some type of account for Conor at ML at the request of Mike's Dad. We've personally never added to this account as we'd have to mail everything to Kevin (the BIL) to deposit for us and for me, I just find it easier to transfer money to Con's account online from our accounts or drive to the bank to make deposits. So, I'm embarrassed to say that I don't know much about this account, even though I'm the guardian listed, except that I believe it's some kind of brokerage account. To be honest, there is not much in there anymore because what Mike's dad has deposited has been swallowed up by fees. But, that account is another option, I'm assuming, to put this money in. We did ask Kevin at one time about 529's and he said we wouldn't want him to open it as they use New Hampshire's 529. :confused:

So, as you can see, I'm not very finance savvy :blush: and was wondering if anyone knew any of the in's and out's of saving for college?

Thanks!

[offwego]

First off the disclaimer...I'm a Canadian banker so some of our "restrictions" may not match to yours.

In Canada the advantage of the "registered eduction savings plans" is twofold. The government adds in a 20% contribution and the "income" is taxed based on the students income level at withdrawl not the parents contribution level (thus reducing tax implications when the money is used for school)

Re the restrictions some of them can vary quite a bit so you will need to sit down with a financial planner to figure out which one is right for you.

Some potential issues.

Only one benificiary can be assigned (you want a plan that allows Connor to use the funds and or another child if you have one or yourselves to use the funds (for schooling) should Connor not elect post secondary eduction. In Canada if the fund does not get used for education you do forfit the government portion on redemption even if you are the "owner" of the account.

Specfic withdrawl dates (some funds may have them others may not)

Risk tolerance..this is a biggie... Connors 7 so you have a what 10 year horizon? You want some growth still but not wild fluctation like you will get from having just one or two stocks (which is where the brokerage thing isn't working for you). There are a gazillion funds (mutal) out there. You want to review ones that offer a reasonable rate of return for your comfort level and a history of growth flucations where possible in the unit price. (and avoid front end or back end fees that can hit you at redemption).

Bottom line...financial planners do not expect you to know what you want (at least a good one doesn't) and should have an open discussion with you and Mike to discover what your expectations, concerns and personal level of knowledge is to recoomend the right choices.

(Honestly it's so much easier to help a client who is upfront about what they don't know then one who try's to bluff there way through it trust me!!)

[DisneyDudet]

My grandfather got me bonds from when I was very little until time to go to college. When I went to cash them, they were over $13,000. I went to a community college for 2.5 years then to a 4 year college for 2 years. I bought a laptop with it. In the end, I only had to get a loan for my last semester.. just because I needed some credit history, even though I had enough left.

I would look into that. I don't know anything really about money, but I know those bonds saved us a WHOLE college career.

[offwego]

My grandfather got me bonds from when I was very little until time to go to college. When I went to cash them, they were over $13,000. I went to a community college for 2.5 years then to a 4 year college for 2 years. I bought a laptop with it. In the end, I only had to get a loan for my last semester.. just because I needed some credit history, even though I had enough left.

I would look into that. I don't know anything really about money, but I know those bonds saved us a WHOLE college career.

Disney Dudet I'm not trying to be rude (it's just the when they were bought is critical) but may I ask how old you are? During the early 80's to aprox early 90's the interest paid on bonds was much much higher then the current rate of return. So as inflation dropped in the early part of 2000 your money was "better" then it was previously even though interest rates have dipped through some fairly historical lows since that time and are only now starting to return to more "normal" levels.

The "when" is a huge part of what makes a good investment good.

[Tick-Tock]

I'm not in finance (in fact I know hardly anything), but it seems to me like the ML account isn't performing at all well if it hasn't even made enough to cover the fees. I wouldn't add anything to that account.

A friend of mine does an annual financial review with an independent financial planner (independent in the sense that my friend only uses them for this review, so they have no stake in selling him on a particular product). It's probably worth the time and money for you to sit down with someone like that and go through your options. I would think that the potential tax implications alone make it too risky to proceed without competent advice. And maybe look into whether your schools or community offer any seminars on investing for your child's future.

[DisneyDudet]

Disney Dudet I'm not trying to be rude (it's just the when they were bought is critical) but may I ask how old you are? During the early 80's to aprox early 90's the interest paid on bonds was much much higher then the current rate of return. So as inflation dropped in the early part of 2000 your money was "better" then it was previously even though interest rates have dipped through some fairly historical lows since that time and are only now starting to return to more "normal" levels.

The "when" is a huge part of what makes a good investment good.

We cashed out in 2002.

[MsMin]

Our state has a program that pays more if you make less. The interest varies and is very very high(state contributes to your savings) for those who have little income and decreases to average rates w/ higher than average incomes. It's scaled. It's called the START program. Have you checked to see if your state offers a program that the state contributes to? I know that in our state I'm surprised at how few know about the benefits.

[snowless]

I am a colleage students too,encountering the same prolem as you .Seeing the answer above,I think i can sove the prolem .Do ypu agree with me ?:mickey:

[crazykids]

I have 3 kids & with all three of them I had a 529 plan in place right after they were born & were issued a social security#. I do work with a financial advisor from Merrill Lynch & he is wonderful! I set up an automatic deposit so that a specific amount of $$ is deposited in each of their accounts monthly & to date the accounts are doing fairly well. I also have savings accounts & CDs set up for them as well from any money they receive for b days, holidays, etc.

[conorsmom2000]

Thanks guys - I guess the bottom line is that I'm going to need to speak with a Financial advisor. I guess I've been afraid that I'll get talked into something that I don't really understand or that will have high fees (like the ML account).

Offwego - thanks for the help and the info! Yes, we have 11 years until we have to send Conor off to college (sounds so far away and so near at the same time!)

[offwego]

We cashed out in 2002.

Ah so many of them were purchased during that higher rate period (the rate of return on a bond is normally set by when you purchase not when you redeem unless it's done early)

Congrats by the way on getting your education and your grandfathers forsight!!!