December 5, 2006

Alone in the Wilderness

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Am I the only one not convinced that a 529 savings plan is the only way to save money for future education expenses? I want to save as much as possible for the Kid's future—but what if her future doesn't include college, as approved by the 529ers? What's the best investment now to support the Kid then, when she may want to build a log cabin in Alaska, or go to design school in Belgium, or cooking school in Japan?

Have you found other investments or strategies that are a better fit than a 529 plan? What do you do about the guilt over not having saved enough money already? [Andy]

Photos by Andrew Jeffrey Wright [not me,] and Dick Proenneke [One Man's Wilderness]


Check out for some hard-nosed, unfashionable, realistic information about finances and kids. At the least Ramsey's extremely sensible approach is thought-provoking, at the best it's an absolutely workable plan, requiring only (ouch) commitment and self-discipline, both of which go a long way toward relieving guilt (which is hard to sustain if you are taking reasonable action). Ramsey has a syndicated radio show that's on a talk radio station in NYC (I don't remember which one -- find out on his website). I think he also has brief, biweekly appearances on an NYC TV morning show -- probably on CBS? gives a bare-bones list of steps he recommends; advice all over the site, MP3s of radio show, etc. are also available on the site. There is a subscription service, but also a huge amount of free information. It's not glamorous, but it's real-life sensible, and as a financial-plan-that-works it has no peer.

Ramsey is a committed Christian (which I am not), but his passion for personal finance that is personal and effective goes well beyond his religious commitment, and his thousands of callers clearly run the gamut in terms of religion, lifestyle, etc. He's blunt-spoken, but respectful of everything except downright stupidity and irredeemed irresponsibility.

Not a simple response, but, golly, it wasn't a simple question!

I don't know if it is or is not the best option, but it certainly isn't the only option.

You certainly need to determine the "risk" (if you will) of your child not using the money as described by the rules of the plan (it is transferable) versus the tax benefits of the plan.

It is like a gift card, but on a much grander scale. If I buy you a gift card to, say, Borders, there's aways that chance you may not ever buy anything at Borders.

If you feel it is likely that your child will do any of these other things, gift the money to your child and invest it, or set up a trust and invest it. Otherwise, try the 529 and take a chance.

And don't forget, you can still withdraw the money for something other than college -- you just pay a penalty (state %age, and federal 10%). It sucks, but you don't lose all the money.

this came up on our couch last night as I tried to do a little 529 research. Since our kid is nearly 2, we're already behind. Even if we put in the most money possible, projections are we won't be able to cover her full tuition. It was rather disheartening. I think we'll just have to do the best we can, seeing as we're not Investment Bankers or millionaires. I think the idea of *not saving* is scarier than the idea of her *not going to college* and losing a bit of money due to a penalty. but to each his/her own. I have heard parents should worry about their own retirement first, as student loans will always be available, but there are no loans for retirement. makes sense to me.

Early on we told the grandparents that the kids needed something far more valuable than plastic toys or outfits to outgrow, and recommended to them that they celebrate the girls milestones instead with a donation to their 529s. They were all cool with this, respect it, and do it. The girls get a little gift (book, etc.) each Christmas, and a fat check in the 529. We use various bonuses, Christmas checks and stuff to add to it each year.

What about a 20 year return of premium life insurance policy that "pays out" at the end of the 20 year term. Depending on how much you put in, it could well more than cover college tuition and protect your child from catastrophic loss of his parent/s at the same time. Its what we're considering.

Clasrk died last year at the age of the injury--so
children who are--and there is still a llot of red sport injury list balloons.

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