Planning for My Grandson's Future

[Guest Jasmine]

I am interested in investing money to pay for an education for my five year-old grandson. I've told that traditional college fund investments will not pay for an education if he doesn't attend a four year college. Please help.

Jasmine

[John G]

Wow, big issue. Noble cause. Many choices. Just be aware of the hype and crisis mongering among institutions that are angling for your business.

BUT.... while there are hundreds of ways to approach setting up a college education plan, there are many pitfalls and traps include: some approaches only limited to tuition, too many plans have high fees and expenses, limited investment choices, limited track record of these plans, getting locked in to one plan (did anyone think about transfering assets?, seems like the answer is no), and questions about investment performance. Plans vary as to what happens to the money if the child does not go to college or a specific set of colleges. Avoid any program where the money reverts to the child at age 18 - beware the Dodge Viper alternative!

You did not indicate your age and if there were any other grandchildren. You might do something very different (trusts, multiple recipient plans) if there were more potential students.

This is probably the wrong web site for answering your questions. You may want to click on any of these websites or google away.

US News - magazine has annual college issue each year, so you will find articles and comparisons at their websites:

http://www.usnews.com/usnews/edu/articles/...08/8savings.htm

http://www.usnews.com/usnews/edu/dollars/dshome.htm

The College Board are the testing guys - they have a lot of generic material:

http://www.collegeboard.com/student/pay/add-it-up/8850.html

Schwab, Fidelity and Vanguard all have plans and decent general material related to what they offer:

https://promo.schwab.com/ad046/ad046home.as...71-2130&src=KXT

http://personal.fidelity.com/misc/gettings...nvestment_plans

http://flagship3.vanguard.com/VGApp/hnw/Se...omepageOverview

Bear in mind that many of the current benefits may expire before your grandson gets to college. You would hope they would be grandfathered (no pun intended) but Congress in a budget crunch can change the rules.

If you and/or your wife expect to be living when your grandchild starts school - consider investing in a tax managed stock fund where you remain in complete control and many years down the road can sell paying only long term capital gains.

[Guest Jasmine]

Wow, big issue. Noble cause. Many choices. Just be aware of the hype and crisis mongering among institutions that are angling for your business.

BUT.... while there are hundreds of ways to approach setting up a college education plan, there are many pitfalls and traps include: some approaches only limited to tuition, too many plans have high fees and expenses, limited investment choices, limited track record of these plans, getting locked in to one plan (did anyone think about transfering assets?, seems like the answer is no), and questions about investment performance. Plans vary as to what happens to the money if the child does not go to college or a specific set of colleges. Avoid any program where the money reverts to the child at age 18 - beware the Dodge Viper alternative!

You did not indicate your age and if there were any other grandchildren. You might do something very different (trusts, multiple recipient plans) if there were more potential students.

This is probably the wrong web site for answering your questions. You may want to click on any of these websites or google away.

US News - magazine has annual college issue each year, so you will find articles and comparisons at their websites:

http://www.usnews.com/usnews/edu/articles/...08/8savings.htm

http://www.usnews.com/usnews/edu/dollars/dshome.htm

The College Board are the testing guys - they have a lot of generic material:

http://www.collegeboard.com/student/pay/add-it-up/8850.html

Schwab, Fidelity and Vanguard all have plans and decent general material related to what they offer:

https://promo.schwab.com/ad046/ad046home.as...71-2130&src=KXT

http://personal.fidelity.com/misc/gettings...nvestment_plans

http://flagship3.vanguard.com/VGApp/hnw/Se...omepageOverview

Bear in mind that many of the current benefits may expire before your grandson gets to college. You would hope they would be grandfathered (no pun intended) but Congress in a budget crunch can change the rules.

If you and/or your wife expect to be living when your grandchild starts school - consider investing in a tax managed stock fund where you remain in complete control and many years down the road can sell paying only long term capital gains.

John,

Thanks for the reply. I am fifty-five years young. My five year-old grandson is a story teller. As a result, we write children's books which are becoming quite successful. My desire is to invest his royalties from the sale of his series in a fund that will assist him with his college education. I do have two other grandchildren. However, none of them are sucessful yet. Thanks again.

Jasmine

[Guest Jasmine]

John,

Thanks for the reply. I am fifty-five years young. My five year-old grandson is a story teller. As a result, we write children's books, which are becoming quite successful. My desire is to invest his royalties from the sale of his series in a fund that will assist him with his college education. I do have two other grandchildren who are two and one. Thanks again.

Jasmine

[John G]

If your grandchilds participation in the children's books leads to "earned income", then your 5 year old qualifies for a ROTH IRA. Another option. There is also the Coverdell education savings accounts (formerly Education IRA) which allows you to fund $2,000 per year.

http://www.savingforcollege.com/coverdell_esas/

The above website includes a lot of info of 529 plans, and has a mesage board. You may want to explore this website for ideas.

Sounds like you have found a fun thing to do with your grandson! Good for you.

[Guest lorac]

I am interested in investing money to pay for an education for my five year-old grandson. I've told that traditional college fund investments will not pay for an education if he doesn't attend a four year college. Please help.

Jasmine