Lazy Man and Money

Exploring College Savings Goals

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College Savings Goals (click for larger)

A few years back, I wrote a short guide to 529 Plans as I put some money away for my niece and newphew’s college savings. The plan I chose was Ohio’s CollegeAdvantage, because California didn’t offer any state tax breaks and the investing fees with CollegeAdvantage’s Vanguard funds were microscoptic. I’m a little behind on reading the newsletters, but I noticed an interesting thing in the Q4 edition of their 2013 newsletter (click that link to open it up in a new window, so you can follow along).

It lays out two facts that I found interesting. The average savings goal for parents is $38,953 for one child, yet the average savings balance is “only” $18,013. This sounds like a big problem doesn’t it? In some ways yes and in other ways no. Sometimes the numbers are tricky.

First, the average savings balance is going to include many people who just started to fund their accounts. It’s not the average account for 16 year olds. If you look at the average age of the children in the accounts, it would seem to be 9 years old (the 1 year olds offsetting the 16 year olds)… which means that people are almost on track for their goals with $18,013. In fact, I’d bet the average age is closer to 6. 529 plans have only been around for 18 years (started in 1996) and I’m betting that they are more popular today than they were then. So maybe we are more on track with our savings than we think.

Additionally, the average savings account balance includes people like me. Sure, I’m probably the rare uncle who opens up 529 plans, but these accounts are intended to be supplemental to their parents’ own savings. I certainly don’t have the goal to save nearly $39,000 for each of them. I even opened up an account in my own name to squirrel away a little money for a future son (and now I have two). However, since I’ve moved to a state that offers a tax benefit, I’ve opened up another 529 plan… and I’ll be opening yet another when my new son’s paperwork comes through (Social Security number, birth certificate etc.). I’ll have 5 different 529 plans all nowhere close to $39,000… but it is by design.

The other point this short chart makes is that the $39,000 amount is only likely to last through 2 years at a public university. One could make a case that the goal is set too low to begin with. On the other hand, there’s no rule that says that parents have to put up 100% of their children’s college education. In fact, I think the children might get more out of college if they have some “skin in the game” by paying for a share themselves. However, this is a whole other discussion where I don’t think there are any right or wrong answers, just people’s personal preferences.

My goal with highlighting this information is the importance of thinking critically. Sometimes you are presented with information that may seem alarming, when it really isn’t.

CollegeAdvantage is Giving Away More Free Money

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Several times in the last year (or longer) I have written about Ohio’s CollegeAdvantage 529 Plan and their gift of free money. It seems like they are always giving away free money. If you missed the last opportunity, now you have the chance for $50 in free money again.

Ten years from now, I see one of two things happening… either Ohio’s CollegeAdvantage 529 Plan is going to rule the 529 Plan World (at least for those states that don’t give tax breaks) or it’s going to need some rescuing from giving away all this free money. I’m betting on the former. Why? Well people tend to keep their 529 plans for a long, long time. They also tend to put a lot of money in them (as college is expensive). The combination leads to some significant gains for the financial institution. However, it is worth noting that CollegeAdvantage has some of the best low-expense Vanguard funds to choose from. In fact, before CollegeAdvantage had this program, I had written about my own adventures in choosing a 529 plan, I realized that CollegeAdvantage was the best option for me.

How to Sign up for CollegeAdvantage

  • Go to Ohio’s CollegeAdvantage and open an account before June 30, 2010.
  • When asked for a referral code use 2481398 to receive the bonus.
  • Deposit $25 or more to qualify for the bonus
  • You should receive your $50 $25 bonus in 7-10 business days. Updated to reflect that it is a $25 bonus.

If you want, you can then use your account to refer a spouse and pick up even more free money.

Some people may avoid this because they have no children now – and no plans to have children. My wife and I have no children. I’m taking advantage (pun intended) of the program for either a future child, my niece or nephew… or possibly even myself or my wife when we retire.

Don’t Forget to Get your Free $50 from CollegeAdvantage

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Since my servers have been having staying up today, I’ll just give a quick update to remind everyone to get a free $50 for opening a 529 educational plan. You don’t need to have children to take advantage of this. We don’t have children and I signed up under my own name. If we have children some day, I’ll transfer it to their names. If not, perhaps I’ll go back to school myself or give it nieces and nephews.

CollegeAdvantage has one of the best 529 plans out there, so I can’t think of a reason why you wouldn’t sign up. (Well, unless your own state gives some tax advantages to using your own state’s 529 plan.)

Get a Free $50 for Opening a 529 Educational Plan

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Every now and again Ohio’s 529 Plan, CollegeAdvantage, offers a nice bonus program to bring in new customers. If you have kids opening a 529 plan is smart money management. If you are like me and only have nieces and nephews it is a great gift to give. Getting started with them may be difficult, so I’d recommend my guide to choosing a 529 plan. That analysis lead me to go with Ohio’s plan – even though they didn’t have offer the bonus program. So they’ll start you with $25 if you follow these directions below. (You guys get all the luck!)

  • Go to Ohio’s CollegeAdvantage and open an account before December 15th. Note: They allow themselves the ability to end the program at any time, so I would act NOW.
  • When asked for a referral code use 2481398 to receive the bonus
  • Deposit $25 or more to qualify for the bonus
  • You should receive your bonus in in 7-10 business days

Since I already accounts in my niece and nephews name, I signed up last time and just made myself the beneficiary. I was too Lazy to sign up get my wife to sign up. This is a good time to take right that wrong.

I love when a great product offers a great deal. That’s quite a rare find. However, it gets even better! If you set a recurring monthly electronic transfer before January 31st, they’ll give you another $25 bonus – $50 in total free money. You just have to make sure that you transfer $25 a month, have a minimum of 3 transfers in a 90 day period, and still have the transfer active after the 90 days. So the way I read it, you could spend $75 to get $25 free. That’s a nice 33% return on your investment.

Last Day For CollegeAdvantage Free Money (and Some Personal Finance Links)

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Today (May 31st) is the last day to claim your $25 in free money for setting up CollegeAdvantage account. This is that very rare opportunity where a company is paying you to secure your future. I explained why CollegeAdvantage’s 529 Plan is great before or you can just take my word and sign up with the following instructions:

  • Go to Ohio’s CollegeAdvantage and open an account
  • When asked for a referral code use 2481398 to receive the bonus
  • Deposit $25 or more to qualify for the bonus
  • You should receive your bonus in in 7-10 business days

Your reward for signing up (I’m optimistic here) is a round-up of some great personal finance posts form the last week: