Kid Money: 529s, Savings Accounts, and More

529-tipsLadies, have you opened a 529 savings account for your child yet — or did you opt for a savings account or investment account? What are your best tips for 529 accounts and kid saving? In general, what do you do with the monetary gifts your children receive from relatives? Do you set aside any non-tax advantaged money regularly for your children — or have you prioritized non-tax advantaged savings for yourself above tax-advantaged savings for college? 

For my $.02, we have a 529 account for each son, but neither has any other kind of savings account. When Jack was born, I did my best to learn from the mistakes of my 20s, when I sat on money because I didn’t really appreciate the power of compound interest, and always felt like I didn’t “know enough” to invest. So after he was born, I gave myself explicit permission to not know a lot about 529s — I didn’t research which 529 too much (I chose New York State because you can deduct 529 contributions from your income, up to a $10K max per year per couple), and I didn’t research which funds too much (Aggressive! Done.) We set up an automatic contribution from one of our savings accounts — it was all very easy to do online.

Our automatic contribution wasn’t huge — it wouldn’t even get us close to the max — but it did represent two decisions. First, it represented a desire to put ANYTHING in there — I really believed then (and now) that whatever we can do, even if it was only $20 a month, would make a difference because of compound interest. Second, it represented a priority shift. I read an interesting article a while ago that tax-advantaged savings was the thing to focus on — so the 529 accounts rank below our 401Ks and IRAs, but above other, non-tax advantaged savings. In fact, the amount we choose to go into his 529 account monthly was the exact amount that we had been investing automatically beyond our retirement accounts.

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