ScholarShare: The ultimate clutter-free gift (sponsored)

If peace of mind looks like a pie, I think I am lucky to have a fairly big serving of it. Though I have no idea how much things will cost in the future, my husband and I are saving money, specifically for college tuition for our two children, and hoping we won’t have to sell our house to pay for any poor estimating we’ve done.

In California, ScholarShare is the administrator of this thing called a 529 plan, which allows you to set aside money for education, tax-free. If paperwork is not your strong suit, a single account for your family is fine; no need to set one up for each child. Any money in the account can be used to pay for anyone’s education, including room and board, computers, etc.

Heather recently attended a dinner hosted by the ScholarShare team, along with moms at various income levels, to learn more about setting savings goals. She called me afterward with the conclusion that a ScholarShare account is really the best holiday gift any grandparent could give. You won’t lose any pieces or step on it; no one will outgrow it; and the baby won’t put it in his mouth. Hence, we share this suggestion with you.

Through the “Give a Gift” option on its website, any gift giver can open an account for children of all ages for as little as $25. And if your kiddo is already on the path to college with a ScholarShare account, aunts, uncles, and grandparents can contribute to an existing account with the “Gift of Education Certificate,” allowing for a personal message to be included for the beneficiary.

The important thing to remember is that no contribution is too small. Even $25 per month will add up — and grow — with interest.

As you can see from this chart, the sooner you start, the better. To reach a savings goal of $100,000 requires contributions of $256 a month if you start when your child is a newborn. Waiting 8 years to start saving means you will need to contribute $607 a month to reach the same savings goal.

ScholarShare also has a phone app and online calculator to help you look at different saving scenarios.

My mom is maintaining her own 529 plan for my kids education already.  It’s a smart way for her to manage her money, and thankfully I didn’t have to take on the task of convincing her to do it.

Do you wish your parents were contributing to a college savings plan for your children? Is ScholarShare something you’d feel comfortable suggesting to them?

Thanks to Scholarshare for sponsoring this post. My family and I are already customers, but until I got to know the company better, I had not thought of letting all the grandparents know that they could participate online without mailing us a check.

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  1. Cara says

    I think having family have the ability to put it directly in is fantastic.
    The only other thought I have though is to look into the kind of account you really want to open for your kids — if you do one that can only be used for education, that money is just wasted if your kids don’t go the college route…or there are HUGE penalties if you try to remove it yourself for other use later.
    We wanted to be sure that if our daughter chose to do the Peace Corps or go study art in Europe or just start working as a chef (or something else entirely — these are just the examples we thought of when she was in utero;) that she would still have access to that money when we choose for her to.

  2. says

    @Cara, I had the same thought about the non-college route and thought maybe it’s wisest to set a savings goal, but not have the whole amount be in an account that is only for college. 529 can be used for trade school as well, but if your kid is going on a mission or directly to work, I’m not sure what happens. (When I was in college, you needed an undergrad degree to get accepted to the Peace Corp, so that college money would come in handy.)

    • Cara says

      I don’t have in front of me right now exactly what type of account we have set up for Brooklyn, but it’s basically just a general mutual fund. It allows us to deposit into it and not take anything out easily (as we could if we just had it in a savings account), and when we decide it is hers, she can use it for whatever she wishes.
      Good to know about the Peace Corps;)

  3. Chris Paganelli says

    A few things about 529 plans-

    1) Every state has a 529. Most states offer a tax incentive for investing in a 529 plan California does NOT. Since California does not offer a tax incentive then you might as well invest in one of the top-rated plans.

    2) it is the only college savings vehicle that allows tax-free accumulation of savings and tax free withdrawals

    3) If you are the account owner you have complete control over how the 529 assets are used. Some other savings vehicles for education require that the assets be turned over to the beneficiary at a certain age.

    4) 529 plans typically have high maximum contribution limits in excess of $200,000

    5) Contributing to a 529 plan can remove taxable assets from your estate. Your contribution is treated as a gift and qualifies for the $13000 annual gift-tax exclusion, What’s more, if you make a contribution between $13000 and $65,000 for a beneficiary you can elect to treat the contribution as if it were made over a five-calendar year period for gift tax purposes.

    6) They can be used for in-state, out-of state or international institution as long as it’s an accredited program

    7) There are no income or age limitations

    8) Only a small percentage of 529 assets are used in financial-aid calculations

    9) If your child decides not to go to college or joined the Peace Corps it is transferable to anyone you chose and there is no age limit

    10) It can be used for ANY mandatory educational expense including Tuition, Room and Board, Books, Computers, and any other mandatory fees

    The fact that you withdrawal money from it tax free could be a huge savings. Most of us with kids like to think we will be in a higher tax bracket when our kids go to college. Just to illustrate; if you are in the upper tax bracket of 35% and you have $100,000 in a 529 plan that would equal a tax savings of $35,000. If it was taxed at current capital gains rate of 15% (which may be going up) that would be a saving of $15,000.

    I would definitely consider this a gift that keeps on giving….

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