How Should I Invest For My Kids’ College Education? (Your Advice)

Your Advice - help answer readers' questionsIf you have kids, one of the issues that you need to consider is what you are going to do about college expenses and if you do decide to save money to pay for college expenses, where is the best place to put that money. That is what this following question from a reader is not sure about:

I have 3 kids that are ages 4, 8 and 10. I currently don’t have any designated accounts for them for college and I’m curious what I should do in this department.

I have been maxxing out our retirement plans and our home is completely paid off. We have no credit card debt and the only debt we do have is one car payment which we can easily afford.

The question I have is what should I be doing? I have looked into 529’s and prepaid tuition, but i don’t see the advantages of either of these. The CPA recommended that we not to save anything in the kids’ names due to possible financial aid impact.

I am expecting that they will take out some loans and may even need to work some as well if they all are going to college. We have some local colleges, so they could even live at home and attend if they are interested in going to one of those colleges and not taking out bigger loans.

When my kids do leave, we will most likely downsize our home. But, I don’t know what kind of market we will have then so I don’t want to depend on any profits from that for college expenses.

If you were in a similar situation, what steps would you take to start saving for your kid’s college education and where would you be placing the money?

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5 Responses to How Should I Invest For My Kids’ College Education? (Your Advice)

  1. Chris says:

    Why not a 529 Plan?

  2. dan says:

    I think you may have dismissed 529 plans too easily, but it does depend on the state on how much of a tax benefit you receive.

    I would stay away from prepaid college unless you’re absolutely sure your kids will be attending a certain college.

  3. Spokane Al says:

    I agree with the previous comments. A 529 plan with its flexibility to change the recipient from one child to another in the event circumstances change is solution to consider.

    If you go the 529 route be careful of which plan you choose. Some states offer state income tax advantages for certain plans so that should be something to look at.

    If your state is not in the above category then I would suggest you consider a plan operated by Vanguard for the rock bottom lowest fees.

  4. Frugal Momma says:

    While I am not in as good of a position as you, we still have a mortgage and are almost maxing out 401ks, Roths-we are saving for the kids in 529.

    If dont want to do a 529 put money atleast into mutual fund or money market accounts, that you can touch when they are in college

  5. kickstand says:

    529. Utah has generally been regarded as the best for a number of years.

    If your kids earn income, you might consider putting an equivalent amount of money into a Roth IRA in their name.

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