How should we start saving for our first daughter?
September 23, 2009 2:32 PM Subscribe
How should we start saving for our first daughter?
We are expecting our first and feel we should start setting aside some money for college/career dev/whatever she may want to do. We are both young (22 and 23) but make decent money ($75k/Year pre-tax) and can spare a little bit. Of course as salaries increase, so will the amount we put in. Where do we start? I was suggested a financial adviser, but will not pay for one. A simple savings account sounds like the simplest but worst way. Help a new-to-be-parent out! Wife and I are both financial newbies, so no idea where to start.
We are expecting our first and feel we should start setting aside some money for college/career dev/whatever she may want to do. We are both young (22 and 23) but make decent money ($75k/Year pre-tax) and can spare a little bit. Of course as salaries increase, so will the amount we put in. Where do we start? I was suggested a financial adviser, but will not pay for one. A simple savings account sounds like the simplest but worst way. Help a new-to-be-parent out! Wife and I are both financial newbies, so no idea where to start.
Best answer: Google "529 plans" and you'll get a host of information. Basically, they're a tax-free way of saving for the kiddo's college expenses, akin to an IRA. Your bank is probably the best place to start -- there are safe investments (like CDs) that will return slightly more than a savings account, as well as more advanced options (e.g., the stock market). We decided to go the Independent 529 route, which is a different thing entirely. (Again, Google is your friend.)
And of course, good for you for starting out early! Look into starting an IRA for yourselves now, too. While it seems like that extra hundred bucks a month (or whatever) could be used for something much more fun, the magic of compound interest makes it a super-smart move. (Everybody -- including all financial advisors/books/magazines/relatives -- will give you exactly the same advice, but it's up to you to be one of the very few who actually take it...)
posted by turducken at 2:44 PM on September 23, 2009 [1 favorite]
And of course, good for you for starting out early! Look into starting an IRA for yourselves now, too. While it seems like that extra hundred bucks a month (or whatever) could be used for something much more fun, the magic of compound interest makes it a super-smart move. (Everybody -- including all financial advisors/books/magazines/relatives -- will give you exactly the same advice, but it's up to you to be one of the very few who actually take it...)
posted by turducken at 2:44 PM on September 23, 2009 [1 favorite]
In Michigan there's a program called MET (Michigan Educational Trust). You may want to check to see if your state has a similar program.
posted by axiom at 2:55 PM on September 23, 2009
posted by axiom at 2:55 PM on September 23, 2009
Originally from Michigan and had a handful of friends who benefited HUGELY from the MET.
High five for responsible parents. Good luck with your pregnancy.
posted by mittenbex at 3:22 PM on September 23, 2009
High five for responsible parents. Good luck with your pregnancy.
posted by mittenbex at 3:22 PM on September 23, 2009
Nthing 529 accounts. Depending on the exact plan there's some flexibility about precisely what constitutes an educational expense and what types of institutions qualify (university versus community college versus trade school versus certification program), and there's some limited transferability in the event that your daughter doesn't need some or all of the funds. It's pretty much made of win.
posted by padraigin at 3:45 PM on September 23, 2009
posted by padraigin at 3:45 PM on September 23, 2009
529 plans apparently vary state-to-state although you can open one in whatever state you want, so do check into the differences between them.
posted by GuyZero at 4:22 PM on September 23, 2009
posted by GuyZero at 4:22 PM on September 23, 2009
Nth 529.
posted by timdicator at 9:21 AM on September 24, 2009
posted by timdicator at 9:21 AM on September 24, 2009
Best answer: This is a more complex topic than can be probably covered adequately in an AskMe comment. If you don't want to get a financial planner, I suggest you read a couple of personal finance books instead.
_Personal Finance for Dummies_ by Eric Tyson is excellent and includes information on saving for your children's education, as part of its fairly comprehensive coverage of what the average middle to upper-middle class person needs to know about personal finance. At your age, investing $15 and a few hours of your time on this book has a likely potential payoff of hundreds of thousands (or millions!) of dollars in smarter financial choices made over your lifetime.
I don't have any recommendations for books specifically about saving for college, but if you search Amazon for "saving for college" and buy something that's highly rated and recent (last couple of years) then you should do OK. I do think it's worth reading a book, because it's not as easy as just "get a 529 plan" -- financial aid offices view assets differently depending on what sort of asset and whose name it is in, so maximizing your daughters' future access to free grant and scholarship money requires strategic advance planning.
posted by Jacqueline at 6:18 PM on September 25, 2009
_Personal Finance for Dummies_ by Eric Tyson is excellent and includes information on saving for your children's education, as part of its fairly comprehensive coverage of what the average middle to upper-middle class person needs to know about personal finance. At your age, investing $15 and a few hours of your time on this book has a likely potential payoff of hundreds of thousands (or millions!) of dollars in smarter financial choices made over your lifetime.
I don't have any recommendations for books specifically about saving for college, but if you search Amazon for "saving for college" and buy something that's highly rated and recent (last couple of years) then you should do OK. I do think it's worth reading a book, because it's not as easy as just "get a 529 plan" -- financial aid offices view assets differently depending on what sort of asset and whose name it is in, so maximizing your daughters' future access to free grant and scholarship money requires strategic advance planning.
posted by Jacqueline at 6:18 PM on September 25, 2009
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posted by sharkfu at 2:35 PM on September 23, 2009