Education Savings Account for Kids

529 isn't that simple.

I chose not to do a custodial account cause it counts against a childs wealth down the stretch.

I chose the Coverdale ESA (basically an educational IRA) Tax free until 18 years old but the money has to be used for school purposes. Not used for school then its taxed and it has a 10% penalty. School expenses include housing and living expenses so its flexible.

$2k limit on contributions. My daughter is 7 so I'm guessing my $23K isn't enough to pay for school but its also not too much that if college isn't the part of the game plan we don't get killed either on the taxes. The Coverdale (which is a 529 plan) doesn't require a mutual fund option. So I get to pick and choose stocks. Funny or sadly I use it as one of my options accounts. I don't have to pay taxes on the rewards. I have a big mix of trades and investments in that account.

My income varies from year to year so I see no use in opening a custodial account. I have multiple friends who do for various tax reasons but my long term plan doesn't include saddling our daughter with net wealth at this point.

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I chose the Coverdale ESA (basically an educational IRA

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Nice, is that tax deductible as well?

2k seems to be a good amount to save. Not enough to have it paid, but a decent chunk and puts most of the responsibility on the child.

all 529 programs count towards the parent wealth and not their income. custodial accounts can hurt the financial aide package more

Loans and financial aide are different.

Thanks for the suggestion guys. Any more suggestions please post them up. I will be doing something with the money within a month.

When it comes to setting up a separate account, the first priority should be maintaining control over the money. For custodial accounts, once the child turns 18 years old, the money is theirs to spend as they see fit. PERIOD. For that reason, I would shy away from a custodial accounts.

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I recently read that if you're not maxing out your 401k you should always put the money to your 401k before your child's education savings. Reason being, you can borrow money for school (even against your 401k), but you can't borrow for retirement. That being said, I set up a Coverdale for my first when I got $2500 in his savings, and will set up my newborns as soon as his savings hits $2500.

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I get what your saying. I also chose Coverdale, but I think we are in the minority. Not a very popular 529 plan.