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Do you have a savings account for your DC?  

post #1 of 34
9/7/06 at 8:58pm
Thread Starter 
We would like to start a savings account (college? whatever?) for DD so that other people can put $$ into when they are inspired to provide her with stuff? Anyone else do this? What sort of account do you use? How much did you need to start it? TIA.
post #2 of 34
9/7/06 at 9:26pm
We were never able to save up enough to make a dent in dd's college expenses, but they have had two different types of savings' accounts. I believe most banks now require that it be essentially a joint account for both you and your dd, with her requiring your signature to withdraw the money. This is a reasonable safety precaution, because how would you feel if dd withdrew enough money to buy a one-way Greyhound ticket?

The last time one of my dc opened a savings account, we only needed $100, whereas an adult would have needed $200. Do be aware of how much you will need to keep in there to avoid service charges. The bank we use now requires a very low minimum, but when First Interstate Bank was bought out by Wells Fargo, they started charging my dc a small monthly charge for having the balance too low.

We didn't have a car and I was not able to get to the bank before their ENTIRE savings were eaten up by those charges. My dc opened those accounts with the pennies they had picked up off the floor that xdh left lying around in an apartment that was pretty filthy when we split. The kids were 2 and 5 at the time and learned that if you work hard and save your pennies and put them in a bank and keep them there, someday you'll wind up with





















































ABSOLUTELY NOTHING!!!!!!


: : :

However, the savings bonds we bought from saving up small allowances, recycling, gifts from grandparents etc. somehow survived quite a few family financial disasters and I found them in my Safe Deposit box this year, finally remembered where they had come from, and gave them to dd to pay for her World Religions text.

Since I don't know anything at all about your financial situation, I also might as well go ahead and add that many Money Market Funds (my cousin uses Vanguard Wellington, I believe) pay much better interest than a passbook savings account and will let you open an account with only about $1000 or so.

I hope some of this helps and I think it's a great idea; I wish I had a small fraction of what well-meaning friends and family spent on excessive quantities of stuffed animals, plastic action figures, and polyester dresses with Disney characters on them in a bank right now so dd wouldn't have to take next semester off to pay for the semester after that's tuition.

BTW, she got her high school diploma through a self-directed independent study program when she was fourteen, has taken at least one class for the past five semesters, and hopes to have enough credits at the end of this semester not to be considered a "freshman" any more.
post #3 of 34
9/7/06 at 10:11pm
We have a college fund and an investment account for her. We opened both with about $1,000, I think, but I'm pretty sure neither had a minimum.

I highly recommend savingforcollege.com. It has great state-by-state advice on college savings plans. Ours is for PA residents only, so I won't bore you with details, but there are so many plans out there to choose from.

If you want a plain ol' savings account, EmigrantDirect.com pays 5.15%. I haven't found anything out there that's higher. And the cash is liquid--it's a high-interest savings account.
post #4 of 34
9/7/06 at 10:16pm
We have several different savings account type things going for DS. We have a regular passbook junior savings account at our bank. I put birthday and xmas money in it for DS. When he is a little older (currently 3) we'll have him put the money in himself, plus any allowance we might decide to do (or half of it, at least). I also save our spare change and take it in and deposit it in his account with him every so often. So, that is relatively small amounts of money into that account.

Then we have his college savings. He has a 529 college savings plan through the state of Iowa. You can open a plan in any state, not just the one you live in. However, if you pay state income tax there may be advantages to using the one in your state. Anyhow, Iowa has a very low minimum to open the account ($100? Maybe less, I can't recall) and low minimum desposits ($25 or so) when you do make a contribution. Other people can also make desposits into the account for gifts or whatever. We put about 50% of our intended college money in the account each month via direct deposit. There are sevearl savings tracks (mutual funds, basically) to choose from and you can move the money from track to track if you want. We choose one that starts out more risky and then becomes progressively more conservative as the child nears college age.

We also have a coverdale IRA which is for college savings. I think this one gets you a break on federal income tax. There is an annual cap of around $2000 or so a year that you can contribute for the tax break. We also do this with direct deposit. We choose a Coverdale through Vanguard because they have a good selection of funds to choose from, good performance, very low fees, and we have other money there so I like the company.

There is also a state prepaid tuition plan in most states - but from the research I did it was sort of a lousy deal. We got a Motely Fool book on investing for college and it was very helpful.

Sorry this is sort of long winded - I hope it answers your question.
post #5 of 34
9/7/06 at 10:24pm
We don't have an account for DD yet, since she isn't born yet! But I have had college savings accounts (529 plans) for my 2 nephews (ages 3 and 5) and niece (just turned 1) since they were born, and I contribute to them steadily every month. It's adding up quite nicely. If all goes as planned, I will have enough socked away to pay in-state tuition for 4 years of college for all three of them. As soon as DD is born, I'll open an account in her name as well.
post #6 of 34
9/7/06 at 10:43pm
My parents had a savings account for me, I think I used most of the money to buy a savings bond (which I still haven't cashed).

There was some left though, and after years of un-use they started charging me a service charge and hiding it by only sending me a statement quarterly instead of monthly. I'd forget in-between statements. I closed that account when I realized that it only had $13 in it!!! I got sick of that bank because they had a service charge for *everything* my other bank pays me to keep my money with them (checking account, $1000 minimum balance). Service Fees are a great way to drive away otherwise life-long customers!!
They also had a CD for my college fund (also with the first bank) and I think I cashed it out for $300 - oh wow, a textbook. There was always a lot of legal smegal about me being a minor on that account, had to have mom's signature, etc. Even after I was 20 and didn't live in the same city as her - because it was set up as a minor account I still had to meet her and go to the bank together in order to get my money.

My grandmother did much better for me, I'm not sure how she saved up the money (over the years or saved a tax refund, I'm not sure) but she gave me $1000 upon highschool graduation. That was much more useful.
post #7 of 34
9/7/06 at 10:52pm
I would recommend an Iowa 529 or a NY 529. You contribute with post-tax dollars, but then you don'thave to pay federal taxes on the interest, and you don't have to pay federal taxes when you withdraw it. It is state tax free if you live in those states. Massachusettes probably has a 529 as well, but its fees may be so high that the money you'd save by avoiding some state tax wouldn't cover the fees. Both of my children have Iowa 529s. I think they only needed $50 to start.

You don't have to go to college in that state or anything. The money from a 529 can go towards any type of schooling, really. College, university, beauty school, bartending school, schooling abroad, etc.

You would be the owner of the account, your child would be the beneficiary, meaning that they couldn't take money out without your permission. If they decide to never go to school, the money can put into some other beneficiary's name without any penalties (but I think it has to be a relative).

Iowa and NY's 529s don't have any minimum balance requirements or anything. I started a PA 529 before I knew any better - it has higher fees, and I have an annual penalty unless I contribute at least $50/month. Ugh.

Check this link out about 529s. Iowa and NY are also linked to Upromise, if you do that. Companies will contribute to your child's 529 based on what products you buy. As a nearly-all whole foods eater, and cloth diaper user, there's not much Upromise has to offer me, but there are some of the companies on their site that I do use. A bunch of online companies too.

Another thing I like about the 529s - you can choose to invest the money in an account that will start off with aggressive stocks when they're young (and college is years away, so growth is more important than stability), and it will automatically shift to more conservative stocks and bonds as they get closer to 18.

Let me know if you have any questions
Aven
post #8 of 34
9/7/06 at 11:06pm
We have a 529 that was set up through UPromise. I opened it with just $25.00 and have coupons to mail in with contributions.. I just sent the coupons to my fmaily at Christmas/Birthdays and they sent in money. Worked great! MIL has investment accounts for all the grandkids and my mom has a savings account set up for them. When my dads estate settles we will put big chunks in the account for both boys and let that set for 17 years!
post #9 of 34
9/7/06 at 11:08pm
Quote:
Originally Posted by avendesora
Another thing I like about the 529s - you can choose to invest the money in an account that will start off with aggressive stocks when they're young (and college is years away, so growth is more important than stability), and it will automatically shift to more conservative stocks and bonds as they get closer to 18.

Let me know if you have any questions
Aven
Thats what we have through COlorado 529. We are in an age based potfolio, that is super aggressive right now, and adjusts every 3 years the closer they get to college.
post #10 of 34
9/7/06 at 11:14pm
nak

My mother is into all things financial (used to be a tax preparer and educator); she opened 529 accounts for dd and ds within two weeks of their births and she and my father put money in every birthday and Christmas.

I have passbook savings accounts for both of them as well and any money they receive from family members goes in there. I roll every $500 we reach into a short-term, high yield CD and am slowly laddering them and rerolling them as we go. I love Liberty Bank -- no minimums on their accounts and *no* fees. (Same for our own personal checking and savings accounts.)

We were also given a couple savings bonds that we keep in a lockbox.
post #11 of 34
9/8/06 at 2:38am
Our kids have regular savings accounts at our bank. But the bulk of the saving we do for the kids goes into their 529 accounts. We have it set up so that each payperiod, a certain amount is directly deposited from DH's paycheck into each 529 account. We also deposit all birthday and Christmas money into the 529 accounts. When all is said and done, we deposit about $1000 into each child's account each year. It's not a lot of money, but it's better than nothing
post #12 of 34
9/8/06 at 9:28am
We've foudn that the "kids" accts at our local/regional bank have no fees. We put all of dd's gift $ in there and once in a whiel we make a cash deposit if we have extra around. We plan on doing college savings differently.
post #13 of 34
9/8/06 at 10:42am
We opened a 529 for dd with a large lump sum when she was a couple of months old. We use Virginia's American Funds. They have higher fees than Vanguard (some ongoing 12-1b fees, higher expenses) but no load and their performance has been stellar.

We also have a Coverdell ESA because dd goes to private school. The advantage of the Coverdell is that you can use it for elementary and secondary school. It has a cap of 2K per year, though. The advantage of the 529 is that Congress just passed (in July) a bill that now makes 529's federally tax free forever (it was until 2010 before that, and Coverdell wasn't covered in that bill). Also the 529's have very, very high limits.

We also have some money invested in a custodial account. We put all of our pocket change into a jar every day and then deposit the money every few months. I'm amazed at how fast this seemingly small amount of money is growing. Literally, pocket change, and already 4 yo dd has $1500 in it. I'd encourage everyone to do this for their kids. You don't even notice the money gone from your budget because it's just pennies a day. Great way to save a nice $10,000 - $15,000 to give to them when they turn 18 (assuming you invest rather than save it) or to put toward college savings.
post #14 of 34
9/8/06 at 7:41pm
When my first daughter was born, I opened up a savings account for her at my bank. With her as the primary accountholder, there was no minimum balance. With my second daughter, I didn't have her SSN yet, and had received a $50 check from my grandmother from out of state. I didn't want to leave her check uncashed for so long, so I opened a savings account in my name for Sophia. Since I am not a child, hte minimum balance on that account is $50, but that was okay, since I was opening it with $50. In alaska, we get a PFD in October. Each PFD my children earn for each year they live in Alaska, I plan to deposit into their savings accounts. I think it is a good idea to start a savings for your kids. My parents never did that for me, I always had to work for every little thing I have. I want my kids to have a good start in life, better than mine.
post #15 of 34
9/8/06 at 8:19pm
Thread Starter 
Thank you mamas. With Avendesora's advice, I think DH and I will be headed toward a NY529 as a plan to move to NY in the next year is already in the works. Do you get the Christmas/Birthday notes to send to grandparents/relatives for free? when you set up?
post #16 of 34
9/8/06 at 8:25pm
They should totally have notes to send to grandparents. However, I haven't seen those specifically. When you do open an account, they will send you mail-in deposit slips that are specific to your account (the Iowa one does this, and I'm sure the NY one would as well). There are always more deposit slips sent to you whenever they send out a statement. You can pass those around, telling them that they could mail in one of the deposit slips with a check in place of a present.

Aven
post #17 of 34
9/9/06 at 10:17pm
This is a great thread! Dh and I have also been wondering where the best place to start a fund is. DDs both have bank accounts which pay nothing in interest.

Family members have been getting them Series EE bonds for gifts and such but I heard something about those that they might not be the best investment either.

Don't want to hijack, but does anyone have any recent experience w/savings bonds?

Dh is not really into the 529 plans because he doesn't really want someone else making money off of ours. He wonders why we ought to park it there when we can just save here in a tin can or something. (Not really but ykwim.)

I feel so investment challenged!
post #18 of 34
9/9/06 at 11:16pm
Yes, they do make money off of you. They're a business. Businesses generally have to make some money somewhere. They're managing the investment. Because it's invested in stocks and bonds, it will earn you way more in interest than your tin can will. There is a chance, even a good one, that over the next 18 years there will be a year where you will lose interest, and you'll have to pay fees on top of that. But on average, the fees will be significantly less than the interest you're earning. They are not paying you interest; they are facilitating you earning interest in the stock market, and they charge fees for that service. Choose a 529 with reasonable fees, and then don't worry about it.

Aven
post #19 of 34
9/10/06 at 5:20am
:

I totally thought we were the only ones who did the "pocket change for college savings" thing We also have a 529 that we put $100 a month into, via direct transfer from our bank account monthly, so we can't "forget"!
post #20 of 34
9/10/06 at 5:45am
We have a 529 plan for DD. We opened with a $1,000 that my parents gave DD shortly after she was born but we didn't need that much to open the account. I believe the plan we went with requires only $25 to open an account. Since then we've set it up so that a monthly contribution is automatically deducted from our checking account and put into the 529. All monetary gifts to DD go in there as well. I've given the extra deposit slips we get in the mail to DD's grandparents so that they can send in the money themselves.
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