What Is the Best Way to Save for Child's College/Future Without a 529?

General Discussions Forum
1

Hi all

I’m looking for advice on the best way to save for my niece’s and nephew’s future, specifically for college or other important milestones, without using a 529 plan. The reason I want to avoid a 529 is that their parents are financially irresponsible, and I don’t want them to be aware of or have any control over the funds I’m saving.

We come from a background of generational poverty, and I’m still learning about proper investment strategies now that I have some disposable income. I’m planning to invest around $75 per month for each child over the next 10-15 years. I know it’s not a huge amount, but even saving $9,000 could make a big difference for them when they turn 18.

What kind of accounts or investment options could I use that would allow me to set this up and essentially forget about it until they’re of age? I’m looking for something that offers growth potential but also keeps the funds secure and out of reach from their parents.

2

Well done for making advance plans! :smile: Every little bit matters.

529 plans differ but are generally good. Although there may occasionally be a tax benefit, you are not required to adopt your state’s version (see an accountant). It’s usually not going to be a complete mystery, though, as you will usually require the beneficiary’s SSN.

A lot of 529 plans will include a strong emphasis on equities and stocks in the US or other markets, along with target date funds that you may set and forget after you decide what is appropriate for your time horizon.

3

You can use Coverdell Education Savings Accounts (ESAs), sometimes known as “529 Lite” accounts. They are similar to 529 plans, but provide more investment alternatives. It also does not answer your retirement savings question and has a $2000 annual contribution cap. I expect them to be phased out at some time.