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08/06/2014

Sobering Realities of Saving Money for College — start early, deposit often

We achieved one of our big Project Money goals this week. We used our college savings from bank CD’s (certificates of deposit) to open Edvest accounts for each of our kids. The Edvest 529 College Savings Plan is a way to save for college and pay less taxes on the money saved. The key to 529's is that contributions and any earnings used to pay for qualified higher education expenses are federal and Wisconsin income tax-free.

Our current budget is to deposit $50/month for each kid’s 529 accounts. The Edvest site makes it easy to set up an electronic fund transfer or automatic payroll deduction (if your employer can manage that).

Edvest has a handy but scary calculator to determine how much you should be saving. I set the calculator for public college with in-state tuition; it recommends we deposit $520/mo for Celine (age 4), $592/mo for Ellie (age 8), and $610 for Will (age 10) or a total of $1722 a month to fully fund their future education. The calculator assumes a hypothetical annual return (it is set automatically at 7%).

Ugh. There is no way we can afford $1722 a month right now. We are adding $150 per month now because that's what we can afford. Whatever the amount, start saving now. Anything saved will help later on. Try not to be discouraged by the calculator.

My friend Kathy found it very easy to withdraw the money from her daughter’s Edvest accounts when it was needed for college expenses.

Shhhhhhhh

We have another birthday coming up at our house. As we write this, Dave and I are working on a homemade barbie playhouse.

Takeaway for the Week

What is more important than we realized: Start your college savings when you have a newborn if you can. But any college savings will be appreciated, so don’t get discouraged if you didn’t (start that young).

As soon as the baby’s social security number arrives in the mail, you can go on line and set up a 529 account for your kiddo. The minimum contribution for Edvest is $25. Edvest makes it easy for grandparents and friends to make gifts to the account.

“In addition to the potential for federal and state income tax-free earnings growth, if you are a Wisconsin taxpayer, your contributions to Edvest reduce Wisconsin taxable income up to a maximum of $3,050 per beneficiary for 2014.” from the Edvest Tax Advantages page.

What is easier than we thought: Setting up an Edvest account online is easy. It took less than 30 minutes. Have social security numbers and bank account information ready before you start. Just a warning — you do have to go all the way through and complete a purchase for the site to save your information. If you fill in the demographics and stop there, you will lose everything (including the login and password). If this happens, just re-enter all your data. I had to re-enter everything and it still took less than 30 minutes.

 

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Hey - can I help you with some stuff for the Barbie playhouse? I could make little curtains, or bedding? I love to sew - not a pro but could do a few things. I love to emblish and be-dazzel too!! I have lots of cute fabrics and ribbons. Zip me a note on fb "Nicky Strube Cross"

Barbie loves the be-dazzel! What an awesome offer, Nicky. I sent you a note on fb (check your "other folder" whatever that is).

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