Investing for Children
Ever since my son was born, I’ve wanted to begin saving for his college tuition. I’m not going to be overly optimistic and say that I’ll be contributing the whole of his tuition, but it would be nice to be able to pay for say a third to a half. More if possible, but that’s my goal.
Even as a somewhat knowledgeable financial person(knowing and doing are two different things) I found the selections that are available to be overwhelming. Answers to my questions were not necessarily readily available. I wanted something that wouldn’t necessarily transfer to my son when he turned 18 which led me away from custodial savings accounts. That left me with two main options. A 529 plan and an ESA(education savings account) which is also known as a Coverdell savings.
I chose to go with the Coverdell ESA. I found the 529’s way to confusing and I really just didn’t feel that I understood how they worked. The other reason that I chose the Coverdell was that I could open it up at Sharebuilder. I like the sharebuilder model, plus I was able to use a code that gets me a matching $50 Barnes and Noble gift card. I would have liked to have used a code that gets money into the account, but those were unusable on the ESA account. So what we will probably do is sell the gift card on eBay and send that money to the Sharebuilder account.
So, once the account was set up, I then faced the dilemma of what to invest in. My son is only 6 months old, so I wanted something that was more aggressive but that also should show some good returns. Rather than putting all the money into one company I decided upon an EFT. I’m sure that we’ll miss out on the skyrocket stock, but it also saves us from the plummeting stock.
Plus, the EFT that I decided on is DVY. It’s got a fairly good return history as well as it’s focus on dividend bearing stocks. I like that especially. I’m a big fan of dividends and passive income so I’ll try and use that for my son’s benefit.
Did anyone else have a similar story? What did you do to save/invest for your children’s future?
Technorati Tags: esa, 529, college tuition, eft, dividends, college savings
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Moneywalks said,
Wrote on December 5, 2006 @ 1:34 am
I don’t have a child yet but when I get to that stage in my life I hope that I will be able to invest in their college funds as well. Good luck!
G said,
Wrote on December 6, 2006 @ 11:34 am
My goal is to pay for a college education for my child (when I have one).
Bryan C. Fleming said,
Wrote on December 6, 2006 @ 7:11 pm
Why not just forget the college thing and invest that money for his retirement?
I’ve got this theory that the $50,000 you’d spend on college would have a better return just sitting in the stock market. How many of us really use that degree anyways?
It’s just a thought
- bryan
http://www.BryanCFleming.com
thatedeguy said,
Wrote on December 6, 2006 @ 9:58 pm
And I think it’s an awful interesting thought Bryan. I’m not so sure that it works completely. It depends largely on what assumption you make on the increase in salary that a person with a college degree will receive.
dimes said,
Wrote on December 9, 2006 @ 7:20 pm
I feel the same way! 529s are simply daunting, but the other vehicles won’t accrue enough money to be worthwhile ($2000/year isn’t going to make much of an inroad, I fear). With 529s, each state has a plan and a lot of the plans are new enough that we don’t know which ones are good, and I’m not sure how the rules work with people like grandparents aiding in the investment. Such a muddle!