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Educational Savings Accounts (ESAs)

post #1 of 10
6/4/10 at 5:51pm
Thread Starter 
We're in the midst of Dave Ramsey's baby steps (we're on step 5 ... almost there!) and I'm looking in to ESAs for my 2 boys. Everything I've read about them has said to shop around for the best rates and ask for recommendations on where to open the accounts. The problem is that I don't know anyone IRL who has ESAs for their kids. So, if you have one, where did you get it and how do I go about opening one?
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post #2 of 10
6/4/10 at 5:54pm
Why are you looking at these rather than 529s? Just curious.
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post #3 of 10
6/4/10 at 6:04pm
DH and I have a 529 for DS. I believe that's also what Dave Ramsey recommends, but don't quote me on that. LOL.

We got ours through T. Rowe Price. They are the company DH's work uses for 401K, so keeping our accounts with the same group made sense. Although if we had found a company that had more competitive pricing we would have gone with them. I think they also do ESAs.

When I called and looked around it was mostly at investment firms, though some banks also offer them (our credit union does). You might have to have a regular account with them to open an ESA or 529, it just depends on the bank.
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post #4 of 10
6/4/10 at 6:09pm
Thread Starter 
According to Dave Ramsey, there are a lot of bad 529s out there and since I'm horrible when it comes to knowing what to do with investing (see my initial question!), I'd rather stick with something that is easier to understand.

With that being said, if you have solid information on 529s, I'd take that too! I'm always open to learning.
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post #5 of 10
6/4/10 at 6:13pm
I have an ESA for my DD at TD Ameritrade (a discount broker). I already had an account there, so it seemed like the logical place to open it.

We also participate in our state's 529 prepaid tuition plan. One feature of the ESA is that you can use the funds for K-12 expenses as well as college. 529s are only for college.
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post #6 of 10
6/4/10 at 7:08pm
Thread Starter 
Lovelife, What did you need to do to open the 529? Did you have to choose where the funds went? What kind of fees do you have with the 529?

griffin2004, did you have to choose what stocks, mutual funds, etc. were used in your ESAs? Or was all of that done through your bank? Did you use a broker? Or other financal middle man? Are there any fees involved?
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post #7 of 10
6/6/10 at 5:12pm
Sorry it took me so long to reply!

To open our 529, we just went online (I had already called around to different brokerage firms, so knew the pricing) to DHs account, clicked a few buttons and transferred the money in.

We did get to choose where the money went and we can change it at anytime, though I think if we changed it more than once a year we'd have a fee. So far we've just left it where we started it.

Here's a link to the plans they currently offer and their most recent performance.

Their fees vary, but are listed in the FAQs section of the link I provided. Its $25 per year and a mangers fee of a certain percentage, they say .28%, but it isn't that much for us, maybe because it was lower when we signed up.

HTH!
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post #8 of 10
6/6/10 at 5:54pm
Just wondering----

Does #4 have you max out your retirement for the year? If not, have you considered maxing those and earmarking the Roth money for college before saving for college? I always like to hear people's thinking on that issue.
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post #9 of 10
6/6/10 at 7:09pm
Thread Starter 
Lovelife, Thanks for the response! Thanks for the link, I'll have to check it out.

TiredX2, #4 is to put 15% of your income in to retirement (and if the company has a match, that's bonus) whether that's 401K, Roth, or whatever your company offers. Does the Roth have any benefits over an ESA or 529 if used for education? I thought there would be penalties for doing something like that (if I'm understanding your question correctly).
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post #10 of 10
6/7/10 at 4:32am
Quote:
Originally Posted by sewaneecook View Post
griffin2004, did you have to choose what stocks, mutual funds, etc. were used in your ESAs? Or was all of that done through your bank? Did you use a broker? Or other financal middle man? Are there any fees involved?
My state (Washington) has 2 529 options. One is the investment type where you have different investments to choose from. The other is pre-paid tuition (which is the type I'm involved in). It's set up directly with the state agency; no middle man.
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