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How are you all saving for your childs education? My state, Maryland, has a couple 529 Plans and a Pre-paid plan that lets you pay todays rates for tuition in the future. Any pros/cons would be appreciated.
 

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I don't save for my daughter yet and I won't save for her until I'm out of debt and putting away the most I can for retirement. The way I see it, when's the last time a retiree got approved for a retirement loan? Exactly. Student loans aren't going away anytime soon.

But, if I were saving right now, the pre-paid plan sounds kind of good.

I know this isn't what you were looking for but just make sure you're taken care of financially first.

-Rob
 

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Sure thing. I didn't save for their education...they did. I paid for books/clothes/gas/insurance/allowance. They saved what they could and then applied for various gov't loans, school loans, scholarships, etc. If they needed more then we did a co--sign on a bank loan. I wasn't about to work 60 to 80 hour work weeks and have no life . It's all about what you can afford. What you can't they take the debt upon themselves.

Another option was to join the military and let them foot the bill. Afterward you own them the years you spent in school. Nothing like a little incentive. While there are lots of kids who are self motivated I believe there are many more (myself included) who will not put forth the effort they would have if it was their money being spent. Just one way of thinking.
 

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I might get shot for saying this....
I think the best thing my parents ever did for me was pay for my education. With all of the labs I work in (not paid) and all of the work I do for my cycling team, I have absolutely no time to work while in school. Granted I do work full time during the summer, but even with that, if my parents did not pay for my education in about 5 months I would be stuck with around 100k in loans.

How is one supposed to start a life when they are 100k in debt? Yes, I know people in the past have done it, and I know my parents had to take out loans for school, but 10k in debt 30 years ago is much different than 100k in debt now. The rate that tuition has increased has greatly exceeded the rate of inflation, and it is becoming impossible for college grads to handle their debt.

Assume nothing is done about the rising tuition rates and say you kids are 3 years old now, and they will be starting college in 15 years. In some places college tuition is increasing at at rate of 8 to 10 percent a year. At that rate tuition will double every 7-9 years, so it is possible that they will leave school with close to 400k in debt at some schools, and even at some state schools tuition will be close to 40k a year leaving a grad who has to pay entirely for school in loans with about 180k in debt.

I do not think that parents should put their own financial well being behind that of their children, but most people should try to do something to help their kids along.

To answer the original question, 529's are tax deferred until the time you withdraw the money for the tuition, and some states even offer an additional tax deduction on the money you contribute to the plan.
The tuition plan you suggested is also a great idea if the child wants to go to your state school. You said you are in MD, and your state school system is awsome, so I would not hesitate to "force" your child to go there. Let me know if you have any other questions.
 

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529 plans are AWESOME. I have four little trolls and I use the 529 heavily in saving for their education. Some states have really good plans, others not so much. My state (Iowa) has one of the top 5 plans as ranked by Money Magazine. The plan is managed by Vanguard and the fees are very low.

You do NOT have to live in a particular state to use their 529 plans. You can use whichever state you want and the kids can go to any college they want. That flexiblity is one of the cool things about the 529.

The other huge benefit some states offer is income tax deductions for your contribution. In Iowa the deduction is around $2,500 per kid per year per parent (so 5k per kid annually). So to maximize the tax benefits, I try to put 5k in for each kid each year (not easy when you have four of them).

My goal is to make sure each of my kids have around 40-50k in their plan by the time they are 10 or so. Then by the time they're 18 that should have grown quite nicely. It won't put them through Harvard, but it sure will cover a good chunk of a 4 year public university.

Let me know if you have other questions, but the savingforcollege.com site that was metioned is a really good one to get all the answers.
 

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bigD-XCguy said:
529 plans are AWESOME. I have four little trolls and I use the 529 heavily in saving for their education. Some states have really good plans, others not so much. My state (Iowa) has one of the top 5 plans as ranked by Money Magazine. The plan is managed by Vanguard and the fees are very low.

You do NOT have to live in a particular state to use their 529 plans. You can use whichever state you want and the kids can go to any college they want. That flexiblity is one of the cool things about the 529.
Best advice here. Many people do not understand that you can shop among 529 plans. I live in California and opened a Nevada 529 plan through Vanguard because they had what I believed to be the best combination of investment choices along with low expenses.

I would not recommend using a prepaid tuition plan. By doing this you are locking your child into going to a specific school, which they may or may not want to go. They may end up being a music prodegy and need to go to an out of state school, or alternatively, a trade school may be the best thing for them. A 529 allows flexibility in the school they choose.

For the people that are of the opinion that their kids can take care of it themselves, I really think you should reconsider that position. IMHO, part of having children is being responsible for their needs. In today's world a 4 year college degree (or if college is not going to work, some type of skilled trade training) is in my book a manditory minimum for a person to be able to make a decent living for yourself. For me this need is no different than a child's need for clothing, food, housing, etc., and is simply part of the cost of having a child.
 

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For the people that are of the opinion that their kids can take care of it themselves, I really think you should reconsider that position. IMHO, part of having children is being responsible for their needs
disagree, to each their own. school is not a "need" regardless of how you choose to view it.

oddly enough i'm with fred3 on this one, i will support my kids and i'll take care of their basic needs (and books and car and stuff) but they can pay for their own school.

Encourage your kids to make good grades and get scholarships
this is the number 1 best advice on this thread. thanks and good luck with your schooling!!
 

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I had my employer take out $25/week and send to a 529 since my son was born. He's only 5 now so by the time he's ready it may be enough for a semester or 2 at a top school :)rolleyes: )...enough to supplement a student loan unless the fund really takes off (it's in the Iowa fund as there's no fund offered in my home state). Another advantage is that if you live in a state with a fund, most give a tax break for contributions.
 

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What are your thoughts on 529 plans vs. 526'ers? I've heard conflicting reports. Some say that 526'ers are better because the market for them is more mature so there's more products available, plus it's easier to get them up and running. On the other hand, I've heard 529'ers, while slower to accelerate, roll over bumps in the economy much better...
 

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knucklesandwich said:
What are your thoughts on 529 plans vs. 526'ers? I've heard conflicting reports. Some say that 526'ers are better because the market for them is more mature so there's more products available, plus it's easier to get them up and running. On the other hand, I've heard 529'ers, while slower to accelerate, roll over bumps in the economy much better...
I'm not a financial planner, but everything I've heard and read points to the 529 as the best plan for most people in "normal" circumstances. The benefits of the 529 are just too numerous for most people to ignore (tax free growth, low management fees, tax deductions, flexibility, parent control, etc).

The savingforcollege.com guy does a pretty good job of articulating the different scenarios in his book.
 
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