Having a kid soon! What are some general financial things to get started that have worked for you? Specific question - is it better to start a 529, or should I just open a brokerage account that will eventually go towards college expenses?

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Buy used instead of new and you’ll save a ton of money. Your kid won’t know the difference.

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Thought you were talking about buying used kids for a second

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There are legal loop holes that allow you to have a plan for college without it being looked at as an asset and still qualify for financial aid. If you want to learn more about that, we can do a quick zoom. Let me know. Take care.

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FB is turning into an MLM/sales platform. If you really wanted to help people you’d post information here and not try to bait them.

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There’s no question that you should do both. Take the take break from the 529, and have fam contribute to it on birthdays. Start an auto deposit in separate brokerage account and let it build for 25 years - that would be a part of their trust fund.

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Curious what others think as well.

Neither is ideal since both count against potential student aid. Also, 529 plans are fairly limited/restrictive on their own.

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529 tax breaks only by state - if you don’t have state income tax, literally not worth it

529 plan. Take the tax free growth and many states get an extra tax benefit. If yours does not you can look to low cost investments (vanguard) with the Nevada plan.

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We do brokerage. Not state tax in TX. Not as tax efficient, but in event of major emergency can access it for myself in a pinch. And hey if they get a full ride, looks like mom and dad get a new Mercedes!!

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Everyone gets a ride!

There are a bunch of different factors, but some of the big ones to consider are state tax breaks and how actively you want to manage the money. I live in Virginia and get a fairly decent tax break (although on a relatively low tax rate) and I don’t want to actively manage the money, so I put it in a target enrollment date fund in the Virginia529 program. Saves me a few hundred per year on the front end in state taxes, plus thousands on the backend with tax free withdrawals. You don’t get either with a brokerage. On the flip side, the money has to be used for educational expenses, while brokerage account money doesn’t have to, so be sure your kid goes to school - or that you or their kid goes to school (because the money can be transferred).

I’m not a financial advisor, but I’d advise against opening the brokerage account in your kid’s name. If you do, it’ll count against their expected contribution on their FAFSA, which is a higher percent than a parent’s expected contribution.

All that being said, you don’t have to do all or nothing. You can put some in one and some in the other to hedge your bets, but for me I’m all in on the 529 because either they are going, or I’ll go back and get a PhD or something when I’m old for shits and giggles.

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Just an FYI, a 529 will be considered an asset and count against your child when financial aid is determined. I know everyone is a fan of the 529s but ultimately it hurts the chances of receiving aid especially aid which does not have to be paid back like grants and scholarships. So I would take the advice of MD1 and see what legal loop holes are out there.

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I did brokerage instead of 529. You have no idea what your children are going to want or need as young adults - while college is certainly very likely, who knows. So I wanted the flexibility, access and control. Worked at well for me - got laid off at one point, took me 11 months to land a new role. Being able to use those funds for that was huge for me.

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Always wondered this! Market gains over 18 years on a decently started brokerage acct should grow enough, right?

Interested in the FIRE perspective on this

👀 Good question

With open enrollment coming up soon for most people, see if you/other parent have some sort of hospitalization benefit. I think my wife had one through work for Aflac and Aflac sent us partial reimbursement for the hospitalization stay.

I understand the rationale to not do 529 for Texas (no state income taxes). However the ability for me to send a link for grandparents/aunts/uncles to donate a gift to 529 is incredibly easy. Not sure if it’s as easy or would be as well received if I sent link to a brokerage account I have access to.

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