Scholarshare’s 529 Plan
By the time I started college in 1989 I had over $3,000 in my savings account, which was amassed over the course of my entire life up to that point. We used to have “bank day” in elementary school, when we would bring in some cash and the teacher would be responsible for depositing it into our savings accounts. I can’t quite wrap my head around that today. I wonder if I should have had more than $3,000 by the time I was 17…
But really the bulk of my life savings was earned in my teens when I worked at Chick’s Drive-In coating various pieces of raw seafood in a combination of flour, milk, and something called cracker meal [insert joke here] and then serving it to people. After it was fried in oil of course. Nobody would eat that the way it was when I was finished wtih it. We had cooks for that.
That $3,000 was spent in a flash once I got to college. I think I used it for “living expenses” which included second piercings in my ears, cassette tapes, and microwaved chocolate chip cookies at the late-night snack bar in the dorm which was aptly named “Food Sales.” But remember I went to college for four years so it wasn’t like I bought 3,000 worth of cookies all at once. It was spread out. Honest.
I managed to attend four years of a very expensive college due to the incredible hard work and selfless sacrifice of my parents, grandparents, other extended family members, and my own minor labor at Food Sales, other greasy food service establishments on campus, a year spent as a resident assistant in my dorm, and federal loans that took me 15 years to pay back. In fact, I didn’t frame the diploma you see pictured above until I had made my final payment.
I have a similar plan for Kyle and Brady, but their near futures are going to have to include much more raw fish and cracker meal because $3,000 doesn’t go quite as far as it did 3,253 years ago. Plus, there’s no sending cash to their overworked teachers and putting them in charge of growing it into a small fortune, which is what is required to send a child to college these days.
There’s a much better way now.
Did you know there’s an app for that? Or more specifically, ScholarShare’s College Savings Plan app, that helps you while away the time and grow more nauseous by the minute as you peruse the database of colleges and what they cost, and match that up to how much you have saved for your child’s college education, and how much time you have left until he goes to college, and how much you have to put away each month to get there.
And then you’ll decide to find him a trade so that he can just go right into a respectable industry, like break-dancing with the stars, or spike his lemonade with Super Smart Virus like in The Bourne Legacy so he can win a full academic scholarship.
Luckily, once the app has scared you right out of your empty pockets, Scholarshare is there to pick up the pieces. In November of 2011 they teamed up with respected investment company TIAA-CREF to offer a 529 college savings plan in California. With its competitively low fees, varied investment choices, and simple age-based savings plans, Scholarshare’s 529 account can help you set up your children’s college funds so that you just dump the money in there and forget about it. You know, if you want to do that, which I super do, because as I learned at a dinner with representatives from Scholarshare and TIAA-CREF and several Los Angeles-area bloggers last night, the costs of many “marquis” colleges are so daunting that it made one mother with a high school junior warn us to “run away now!”
Or you could actually pay attention to the markets and adjust your savings plan accordingly. That is a good idea, and one that I embrace on a not-so-regular basis. The same way I do with estate planning, and here’s where I should mention that I still haven’t filed my trust papers with the county, because of any excuse I can think of to not pay a visit to the county courthouse, but really the main reason is that I am afraid I’m doing it wrong all by myself and I simply don’t want to pay a lawyer. Because I need that money to save for Kyle and Brady’s college tuition. Or for several years of pedicures.
Anyway, those college costs are not going down, they are simply going up every year, or in some cases more than once a year depending on legislators and the people who make budgets, so squeezing your eyes shut and hoping for the best is not a good plan. Neither is throwing a bunch of money at an investment advisor and hoping she’ll just take care of it for you while her company takes a percentage of every deposit you make. Unfortunately, you do have to read and do some math. And some of you are good at math and are interested in things like tax codes and prospectuses (prospecti?) and a shares and b shares and such things, so you find this kind of enjoyable even. Especially if you have plenty of money, because a 529 is a tax sheltered investment product, which means that when you put money into one, all of the principal (the money you put in) plus all of the earnings (the amount it grows over the years, assuming you earn money instead of losing it – fingers crossed!) can be pulled out tax-free if you use it to pay for expenses related to higher education, which does not include pedicures.
Even if you don’t have plenty of money, you can put some money into a 529, and doing that regularly is a good idea because of dollar cost averaging. That means that when the market is down, $25 buys more shares of a stock because the price is cheap. And when the market goes back up, your stock goes up, and those shares will be worth more than $25 – meanwhile, you’re still buying even more shares that will hopefully earn more money. I enjoy the concept of dollar cost averaging because it is a consolation to me when the market is down, even though I pretty much ignore our investments most of the time because they are so depressing.
All of this information is bouncing around in my head because of the dinner I went to last night. The nice people of ScholarShare took the time to explain much of it to a handful of us bloggers. Our preconceived notions ranged from the very basic “What is money?” at one end of the table to the investment-savvy “This is why a 529 is better than a Roth IRA” at the other end. And then there was Daphne Brogdon, who along with her husband treated us to behind-the-scenes stories from reality cooking shows. Also, there was a tasty chicken dish that Yvonne said was the most delicious chicken she had ever eaten in her life.
Here is some very clearly worded information that I learned from the very smart people who run Scholarshare, which is actually much more helpful than my jumbled version of it, but I wanted to share my jumbled version of it to show you that if you are as intimidated, overwhelmed, and befuddled by the prospect of future college tuition and how the hell to amass such enormous amounts of money by the time your kids go to college as I am, you are not alone. That may not be as much of a consolation as dollar cost averaging is to me, but it’s there. You’re welcome.
Benefits of 529 Plans:
Withdrawals for qualified higher education expenses are state and federal income tax free
For use at many schools nationwide and abroad (as long as the schools are accredited)
Can use for tuition, fees, books, supplies and equipment as well as certain room and board expenses
Account owners control selection of investment portfolios
ScholarShare’s New Features:
The minimum initial contribution to open an account is now only $25, down from $50 a year ago.
Under the revamped plan, fees will be reduced by approximately 30 percent, making ScholarShare one of the lowest cost 529 plans in the country.
The annual asset based management fees now range from 0.18 percent to 0.62 percent, vs. 0.25 percent to 1.06 percent with old plan.
4 additional investment portfolios (15 to 19), giving account holders more options, depending on their savings goals and risk tolerance.
California is one of only 13 states in the US that does not allow you to write off contributions to your 529 plan. Almost every state has a 529 plan. What makes Scholarshare’s product appealing to California parents, then, are the competitive rates, the nifty investment options, their website’s ease of use, and their commitment to customer service.
As a special incentive for September which is also College Savings Month (and yesterday was apparently National Positive Thinking Day) Scholarshare is running a Facebook contest. Two winners will receive $1,529 to open a new ScholarShare account or contribute to an existing one. Just LIKE their page and then share your college savings story – go to ScholarShare’s Facebook page and click on the Share Your Story Tab to enter. Entries must be submitted by 9/21.
And here’s my favorite part: anyone can put money into YOUR 529 account. So instead of giant boxes of pieces of plastic, your relatives can write checks out to ScholarShare with your account number in the memo as holiday or birthday gifts for your kids. This is not a very well concealed hint. In fact, it’s not a hint at all. The kids simply don’t need more LEGOs. They need future chocolate chip cookie money.
I am participating in a campaign sponsored by Scholarshare to help families save for college. I also received a lovely assortment of Scholarshare-branded trinkets, some hand lotion (for all the hand-wringing!), and a very tasty dinner at Campanile to facilitate my paying attention when they talked about math. All opinions above, as well as sleep-loss-inducing anxiety about the future and concern about my pedicure fund, are my own. Of course.