I first contemplated naming this post “How I Started Saving for My Child’s Education.” I was amused by all the potential reactions that it might stir up. “Huh? What child?” or “OMG YOU’RE PREGNANT” or (my grandma’s) “More baby blankets to knit!” Hehe. No, I’m not expecting. Unless you count the food baby I acquired on my recent vacation :)
I figure my kids’ college expenses will come much sooner than my own retirement, so it’s never too early to start saving. I shudder to think what the cost of tuition will be by the time they go to college. When Tony found out I was starting a 529 plan for my unborn child’s college education, he made an offhand comment along the lines of “Oh good grief, she’s nesting already.” He thinks all those mommy blogs I read are having too much of an effect on me, I’m sure
If you’re not familiar with them, 529 plans are college-savings plans operated by a state or educational institution. The earnings from 529 plans are tax free, and the funds can be used at any college in the country. Payments can be for tuition, room and board, or books. Each 529 plan offers different investment options. The Ohio 529 plan has actually been ranked among the top five 529 college-savings plans in a recent article by Morningstar. I’ve outlined some of the highlights of the Ohio 529 Plan below.
Ohio 529 Plan Highlights
- Low investment fees. Total expenses are 0.23% to 0.47% for the age-based options, 0.24% to 0.46% for the static options, and 0.23% to 0.91% for individual fund options.
- No enrollment fee or maintenance fee.
- A wide variety of investment options, including both active and passive.
- Low initial investment ($25), which means you could open accounts for nieces or nephews or other young children in your life, in addition to your own.
- You don’t have to live in Ohio, although Ohio residents can take a tax deduction.
- If you don’t have kids, you can just use yourself as the beneficiary. If you don’t have plans for college, you can withdraw your deposit and referral bonus five business days after it is deposited. (Just remember, earnings are subject to income tax when withdrawn, plus 10% additional federal tax.)
$25 Referral Bonus Instructions
Currently there is a promotion where the referred person gets $25 and the person giving the referral gets $50. I would love for you to help fund my future child’s education Plus, if you have multiple contributors in your family (i.e. a spouse or grandparent), you can sign up and then refer the second contributor. This way you would get both the $25 and $50 bonus. There is no limit to the number of $50 referral bonuses you can receive. And if you’re like me and have yet to birth the beneficiary of the college fund, you can just list yourself as the beneficiary for now.
Here’s how you sign up:
1. Open a new Ohio CollegeAdvantage 529 account with a minimum deposit of $25. You can enroll online or through the mail. I enrolled online and it was super quick and easy.
2. The first step is to input your personal info and choose a login/password. Next, you’ll verify your e-mail and complete the application.
3. After that, you’ll choose your funding amount and select an investment fund. Your initial deposit must be a least $25, and is funded using the account/routing numbers of your bank account.
4. To get the bonus, you will need to enter a referral code at the end of the application. You can enter mine: 2512918.
5. In 1-3 days, your initial deposit will be taken from your bank account, and in 5-7 business days you will get your $25 bonus. The $25 will be deposited directly into the 529 account, and will be invested in the same fund as your initial deposit.
6. You must establish an account on or before December 15, 2009 to be eligible to receive the referral bonus.
Personally, I like the low expense ratios of Vanguard. I also like the idea of inflation-protected bonds (TIPS), so I went with the VIPB fund. If you’re ultra-conservative, you may be interested in the 10 or 12 year CDs with a guaranteed return of 5%APY (minimum balance of all CDs is $500). Jonathan does a good job of reviewing conservative 529 options here. If you like more volatility (ahem, TONY), there are plenty of other options that may suit you.
$25 ETF or Payroll Deduction Bonus Instructions
There is also another promotion where you receive a $25 bonus if you start a new automatic transfer from your bank account or payroll deduction.
Here’s how to get this bonus:
1. Start a new recurring monthly electronic funds transfer (EFT) from your bank account or automatic payroll deduction by January 31, 2010.
2. Contribute at least $25 per month for three consecutive months.
3. Keep the EFT or payroll deduction active for at least 90 days.
4. For EFT only, a minimum of three EFT pulls must have occurred within the 90 days.
5. For payroll deduction only, at least one payroll check must be applied within the 90 days.
The fine print can be found here.
Now, the brilliant thing about this second bonus is that EACH contributor who signs up for an automatic transfer gets a $25 bonus. So if there are 4 contributors for a beneficiary, that’s up to $100 in bonuses that could be received! Some people with multiple children and multiple contributors are really raking in on this deal.