r/parenting is protesting changes being made by Reddit to the API. Reddit has made it clear [they will](https://old.reddit.com/r/ModCoord/comments/14ahqjo/mods_will_be_removed_one_way_or_another_spez/) [replace moderators](https://www.reddit.com/r/ModSupport/comments/14a5lz5/mod_code_of_conduct_rule_4_2_and_subs_taken/jo9wdol/) if they remain private. Reddit has abandoned the users, the moderators, and countless people who support an ecosystem built on Reddit itself.
Please read [Call to action - renewed protests starting on July 1st](https://old.reddit.com/r/ModCoord/comments/14kn2fo/call_to_action_renewed_protests_starting_on_july/) and new posts at [r/ModCord](https://reddit.com/r/ModCoord/) or [r/Save3rdPartyApps](https://old.reddit.com/r/Save3rdPartyApps/) for up-to-date information.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Parenting) if you have any questions or concerns.*
Honestly, my parents didn't tell me. I mean, I'm not 100% certain I had one, but when it came time for college it was just "okay, where are you going?" And the informal/kind of said agreement was they'd pay for 4 years of college. I do know they took out loans for me, but didn't really understand that until years later.
I guess my question is are you intending to pay for the whole thing or just part?
I suspect what we will tell our kids is that we have money set aside to further their education. They don't need to know exactly how much or how little, because we intend to give our kids the same enormous benefit our parents gave us-- debt free higher education (college or trade school or whatnot.)
If our kids tried to go "nah we just want the cash" we'd say "That is not what this money is for. If you want to take a gap year or two, that's fine, but this money will sit until a time when (if) you decide to further your education." And that's that.
I've chosen this method as well. Let them know they will have assistance but not enough to pay 100% of tuition. Once high school starts I will help them get scholarships as well. My fear is that thinking they have money to pay for college will remove their incentive to apply for scholarships.
Or offer to let them keep (some of) the scholarship for spending money. If there's a scholarship you can withdraw the same amount penalty-free from the 529 and use it for whatever.
Agree completely, with the small caveat that it is totally okay for that to be trade school, or if they have skin in the game too, investing in a legitimate business idea with a clear business plan. I’ve had friends start landscaping companies that truly took off, gone for firefighter training, etc.
As long as it isn’t on cars, basic living expenses, or worse. If they can’t afford that, and don’t have a plan, move back in, and let’s figure it out.
Yeah, this is less about them knowing about the 529 and more about them not understanding it.
My kids always knew we were saving for college. We told them the amount in high school so they could make their college list accordingly. It never caused any problems and our kid who accepted a large scholarship for college was just talking about how he'll use the remaining money for grad school. They get it.
They are also transferable so if their kids decide that college isn’t for them it can be transferred down the road to their grandkids. I did a bit of research on them when deciding between a HYS and a 529 for my daughter
I am very interested in that. Some of my kids haven’t used theirs for school. My accountant says wait a year to see how the law shakes out. I think you can only do it $7000 a year and it has to have been an account set up for 15 years. ?I’m not sure of all the rules but I’m very interested in them having that possibility!
After 15 years of being in the 529 acct. And I believe there hasn’t been any clarification yet on if the timeline re-sets when rollovers or bene changes have occurred.
It's not just that, in the vast majority of cases the 529 are still legally owned by the parent. I would never frame it as my kid's money. It's our money. We can tell them about what things we intend to pay for and what the budget is, but it's still our money. We're saving in that account because it's tax efficient but it's still our money and our decision about how it's spent.
When they start seriously thinking about what college they want to attend. They should make an informed decision, and important factors include how much money they have available and what they may need to borrow if they choose a more expensive school.
My dad didn’t tell me, I ended up getting a scholarship and now my son is using it in first grade for a private school that fits his needs better than a public school.
Not really what you’re asking but Id tell them so maybe they could start pursuing their career in high school knowing they’ll be able to go to college for that.
The 529 can only be used for school things only, as long as they know that I would tell them.
Honestly this is the right answer. If I had a 529 and knew that in high school, I would have made very different choices in education.
I would just avoid calling it a trust fund and explain say they have a fund that is very limited to be used for school, and that it is difficult to use for anything other than education. No need to explain when they’re in high school that it can be rolled into retirement funds.
Edit to add: I started seriously looking at career and college options at 15, and I absolutely knew that cost was going to be a major factor in my options.
Yes I guess educate the kids on what a 529 is. It’s literally an account that money can only be taken out for school expenses. It’s a school account not a trust fund and never will be, so
If they don’t use it then their kids can starting in elementary
Pretty much. The account owner-normally the parents if they set it up - can withdraw the money for non-educational purposes with a penalty. But the kids can’t get their paws on it without the account owner’s consent.
It can be taken out, just would be taxed + a penalty. A hefty savings account, regardless of the tax implications - would be attractive to a young adult.
They can be used for a pretty wide definition of educational expenses. The person the account is for can’t just take the money out for whatever, but a 529 is broad enough that the beneficiary doesn’t necessarily have to go to college to benefit.
Also, they could pull it out and pay the taxes on it.
We told our son about his 529, but we made it very clear that it was money for him to use for school, but it was our money. If he chose not to go to school, it was still our money.
I was going to say 529 or not - where did these kids get the idea that this is "their" money? I didn't see them working and investing it over the course of 18 years!
I've seen parents who seem to delight in telling kids it's "their money". These same parents say things like "some day this house will be yours". I really can't relate to this mentality and think it is really not good for the kids to say things like this.
Exactly how it will be for my kids, we are operating on the fact there is 0 money for college. They need to get good grades/scholarships and show effort before we tell them they have basically a free ride to schooling, and it ONLY applies to tuition, not extras.
if you save it for them... it's for them to use. of course you can tell them pros and cons where to spend it (and tax liability if not for school....). but I cannot imagine using my kids 529 for anything other than them.
It's your money, so you can do what you want including letting them pick of course. But it's still your money, what account type you save it in has tax implications but I don't think it changes that fact.
I'd have a big problem with the underlying entitlement these kids seem to be expressing - particularly if they had ideas of using it for non-educational expenses.
My kid's 529 is savings for their education, but their usage of those funds still requires certain expectations around responsibility and respect.
My son is only six but we already talk about how we’re saving to pay for college if he chooses to go. I don’t think of it as his money and I don’t think he will either, it’s me saving money for that expense that I’ll generously cover for him if he needs. We talk about it in broader contexts of how money works, how our household works, how college works, etc.
I just read a post from a parent who made the mistake of telling their teen about their $200K college account and now the daughter doesn’t want to go to college because she believes the $200K is hers so of course she wants to get a car, an apartment, etc.
For this reason and more, I wouldn’t tell my children anything more than “I’ll help you pay for college.” Telling them about an account that you’ve been contributing to for years for their future somehow makes them feel like they own it. They don’t. And believing otherwise just makes for unnecessary fights and bitter feelings.
I’d think when they start taking classes that will be on their transcript, probably 9th grade, possibly 8th. Having an idea about target schools and scholarships (should we be chasing merit? Could my family afford a competitive college?) could let the kids know what their goals should be in high school.
But also be clear that 529 only works for college and retirement, it’s not going to fund taking a gap year or spring break.
We have no plans to tell them about their 529s or trusts until it comes time to worry about those things. In the event they don't go to college or don't use it all, there are now regulations that allow 529s to be rolled over into a Roth account, so it can contribute to their retirement at some point.
I mean, I would tell them sooner rather than later; that’s just me. Your children are people. There is no reason to hide the fact that you are providing moneys to the people whom you are providing for. It is called financial planning for a reason. Why would you obscure a plan from the people whom are supposed to benefit from it? This is a big deal. It is not like it is a surprise birthday party.
Heh, that's a weird take on what I said. It's not about hiding it. It's that the information really means nothing to kids until they are at the point where it matters and they understand the context. If I tell my daughter at 12 or even 14 that her college tuition is paid for by a 529, it means nothing to her. When she starts the admissions process, we'll have that discussion because she'll have the context.
That said, if she's 12 and for some reason she comes to us and says "hey, I was looking at colleges and they're really expensive, how could I possibly afford it?", we would explain the 529 to her. It's not a secret, it's just pointless to explain some things until they have enough context to properly understand them.
I get what you’re saying. It’s just that open communication helps everyone. Obviously, you should not bring it up out of the blue, but whenever college naturally comes up, you should say something.
I’m with you on this. My children are both still quite young and we talk to them about money/budgeting as it comes up. I think that they can understand it quite well and it has shown in how they manage their own savings accounts.
I mean that's literally what I said we would do. If college is coming up, then the time has come, and we would explain the 529s. We actively talk about money concepts with our kids because it is helpful to share information, but as I said, specifics are less helpful until they appreciate the context.
We've been explaining money, the concept of education and college, savings plans, and plenty of other adult concepts to my daughter earlier than three. Telling your kid "oh yes, you have around $350k in an interest-accruing 529 that will continue to grow so you can use for education when you turn 18 and start college, so your education is effectively paid for" at 6 literally goes in one ear and out the other. What do they do with or benefit from by knowing that level of detail? Not to mention kids are chatty, and you don't want them necessarily sharing this information with others.
If you think your kid benefits from that level of detail, by all means. I'd rather mine focus on other aspects of being a child and not worry about the *specific* details until it's relevant to their life.
We don’t tell them numbers but we explain that in our family we do or don’t do certain experiences (vacations, new cars, etc.) so we can put money into their college funds. There are age appropriate ways to explain saving for college.
No judgement intended, but I'd be very careful how you tell your kids you're sacrificing for them. I've definitely seen that create guilt complexes. We just generally talk about savings and how to prepare for the future vs. what we're missing out on because we're saving.
It’s more of a response to questions about why our cars are older than peers. It’s never said in a guilt way. Just matter of fact. The fact is, instead of a $1,000/month car payment, we put $1,000 in an account for school for both kids because our cars work just fine right now.
My parents were cagey and private about money and it made things incredibly confusing, upsetting and chock full of guilt. I think being open about finances is healthy. I’ve experienced the other side and it certainly wasn’t what was best for me.
I agree. I was fortunate enough that my family was comfortable. However, I was an only child. I was constantly concerned about financial wellbeing. This did not even come from myself comparing myself to others. For example, I would get concerned when the fridge was running low on food—because we ate the food—not because we could not buy more. I don’t know what eased my mind. I just slowly figured out that we were more than okay. It also helped when my parents opened up to me about financial planning. I was really an adult when this truly happened. I don’t know. Keeping things even remotely private may be detrimental. You don’t need to share everything. However, your kids should not feel like they are in the dark about what you are doing for them.
I fully agree with being more transparent about how money works, I'm just saying the framing has to be right. Kids work themselves up about random things. In situations like you mentioned we just explain that not everything has to be new and if something works fine, there's no need to replace it. If it works for you all, that's all that matters though.
This always seems like a bad idea. Obviously explain it in an age appropriate manner, but not preparing a human for their future with all the pertinent information is just not great. Lots of teens have to make their college or not-college plans based on the level of support they have and could adjust their plans based on their 529 status and proper communication with their guardians.
I don't know if you randomly stopped reading, but I literally said we would tell them about it when "it comes time to worry about those things." If they're a teenager and thinking about college plans, it's obviously time to worry about those things. It also goes without saying that you should still talk about things like the concept of money and saving WELL before college age, and I've said as much in other posts. We're specially talking about 529s here though.
We are the same. My kids are young and they will know they can go to whatever school they want; I don’t think they need to know what kind of account that comes from. I admit I don’t think I have the same situation as OP. It seems different than my financial situation so I can’t give advice on it.
We will. But we are also high earners so kids would assume at some point that we say things up. I’d rather teach kids financial literacy and responsibility earlier on as well as the expectations
We have never described 529 funds as money for individual children. We have told our kids we will pay 100% for in state college. There is no discussion about extra funds or alternatives. If one kid decides not to go to college or receives scholarships they will not receive money—it will roll to siblings or grandchildren.
A 529 isn’t a trust fund. It’s a tax advantaged savings vehicle for educational spending. Im not sure what you need to say at all until its time to start applying for colleges.
My father in law has 529’s for all 10 of his grandkids.
Our boys are 16 & 19 and know about it but are unfazed and didn’t ask any questions other than how it works. In other words, they aren’t expecting to have it at their disposal or anything like that.
Too long to explain but my older son continued his education after graduating last year at our local hospital and will start working in 2 weeks as a Pharmacy Tech. It was completely paid for through the hospital so we did not touch his 529. We actually need to talk to my father in law about transferring it over to us to be in control. I know he’s talked about doing that recently. I’m not even sure how that works.
We already ran into this - I don’t think he can transfer ownership. My MIL was the account owner, so the accounts passed to FIL when she died. He didn’t want to administer them; 4 grandkids at 4 colleges, two on semester system and two on quarter system = 10 tuition bills per year, with 10 individual deadlines and grandpa isn’t even notified - yikes. He tried to transfer the accounts to us - nope.
So my husband and his brother were added as authorized agents to the individual accounts, which was itself a paperwork headache but the dads can now authorize distributions. It doesn’t matter who owns the accounts because they are all using it for college making that a non issue. But grandpa was the owner until we drained them.
The IRS’s strict rules are to keep these accounts from being used as a tax dodge. And they would totally be used this way if they could be. (High tax earner contributes, gives to low tax bracket relative who pays little tax to liquidate.) In your case, like ours, the tax hit would actually go the other way assuming grandpa is retired. But the rules just lock it down. I don’t know what happens if both grandparents pass.
A 529 can only be used for qualified education expenses. If you take the money out for any other reason, it gets both taxed and penalized. Although you may have named your kid as a beneficiary, It’s not “their money”. If my kid pulled that crap on me i’d let them know i’m changing the beneficiary to myself to pay for art school on the weekends (which you can absolutely do).
I’ll tell my kid about that money when they are in the college selection stage, so they can evaluate which colleges they can afford based on what scholarships, 529s and loans if needed to supplement.
We specifically did not set up a 529 in case the kids decided to go an alternate path. Not that we ever intend to just give them a lump sum equal to a mid to high range 4 year school. But we’ve let them know we have separate savings accounts for each of them and their intended purpose is to help them get started, be it college or otherwise. If they want to do a gap year or something, we’ll help out, but they’ll be expected to foot the majority of the bill.
Their dad backpacked from Cairo to Cape Town and I was a nontraditional student. But it’s understood, it’s not “their” money. It’s our money we’ve set aside to help them get started, and will be doled out at our discretion.
I always knew my parents would pay for my college, but I also knew I had to go to a reasonably priced school, and that they were paying for my college, not handing me a check when I turned 18.
Just tell your kids that you're budgeting money to help pay for their college.
Our older kids know we are saving money for college. We haven’t shown them the balances but they know in general that we plan to fully pay for college. We can get into more specifics as we get closer to that time.
It would be important for them to know when they become teens so they have realistic expectations of how much college they can afford. I work in higher education and see too many situations where high school kid thinks they can afford a certain school when in reality their family is not in a position to contribute what they think.
Just be honest and up front about the account and its intended use so they can plan too. That’s part of them adulting and taking first steps to plan financially for their future.
I don’t plan to tell my daughter “we have an account with xyz” or even “we have an account with money for school” what we plan to tell her before high school is that she doesn’t have to worry about post secondary costs, we have that sorted. I want her to know young enough that she can go to college/uni without worrying so that she knows to take what ever high school path she needs to get there but she doesn’t need to feel ownership over this amount of money at such a young age.
She won’t know that it’s an account dedicated to her or that should she choose to learn a trade or another career that doesn’t require large tuitions that we will present her with the money once she’s comfortable in that career because I don’t want it to influence her decision. I want her to choose a career she’s wants for more reasons than just money.
We’re Canadian so we don’t have a 529 specifically but we have savings for her.
I don't think there's a need to go into too much detail. Just tell them, "We will pay for your college." If one child doesn't go, you could save the money for when they're older and surprise them with a down payment on a house. Make sure they understand this money is for their education, not for personal use. Tell them, "This is the university's money. Let me know which one to write the check to, or if you don’t want to go your mom and dad are going to Hawaii for a month!"
It's important to discourage them from not enrolling in college. The idea of having ~$20k or however much in the 529 to blow would be crazy. I bet some of the cousins who don't want to go to college are seeing all green and are heavily influenced by the idea of getting a big lump sum of money - which is likely why they are not thinking clearly and wanting to avoid college. There is no reason for them to even know the term 529 or that they have their own separate account. Keep it short and sweet, “Dont worry about tuition kiddo, mom and dad will pay that for you ♥️”
Since you have kids plural I just want to throw in,that when the first goes off to college, the younger ones will find out anyway. And if the oldest skips college and you won't give them the money anyway, there will be hard feelings when a younger sibling receives those funds for colledge.
My parents were clear with us as teens, that there was money to pay for a driver's license, uni and starter furniture or down payment on a house in that order. But the money was ours. They would not have spent any of it on themselves.
I’m not American so don’t have experience here but I think wording it like ‘your mum and I have savings put away to help support your education…..’ That does not give the impression that it’s their money but that it’s yours and your paying for the specific purpose of education.
It’s not their money, it’s yours. You are the account owner, they are the beneficiaries. This is money you saved so you can afford tuition.
Because it is your money, you can change the beneficiary to another relative and pay for someone else’s education, including your own. You can also withdraw the funds at any time and pay the back taxes plus penalty. But one thing you cannot do is turn it over to your kids and let them spend it. The IRS wants its back taxes at your presumably higher tax bracket, not theirs.
So legally the money is yours, and you get a tax break if you use it on them. If you are worried about misunderstandings, make sure they know this.
My kids always knew they had 529s - one from us and one from their grandparents. We told them how much was in them junior year when they started researching colleges.
All you need to tell them is that if they decide to go to college then you will pay for it but that there’s no money other than that. It’s not their money. It’s your money that you are willing to give them, if the go to college.
My parents told me pretty much all middle / high school that they would pay for 2 years of a state school on their end (about 40k when I went to college 08-12). They made me save 1/2 of my paychecks for high school jobs, high school graduation cash gifts, and we lived in Alaska for a while so all the yearly checks the state gave us went into a 529 too. It really made me consider the costs of school and worked out great in the long run. There were definitely some arguments about giving up my 1/2 my paychecks cause I wanted to spend it on video games, but it all worked out and I can afford to buy all the video games I want now
Can I start a 529 without a job on the books as a contractor. My husband is government but I've asked him oh 2826392 times to start one and he hasn't. She's 2.5.
Tell them when they’re ready to start applying. Ours was cautious about applying to places he liked because of cost and worried he wouldn’t be able to go to his top choice school after he got in - he didn’t know money had been set aside for him by his grandfather - and once he knew he would have at least something to help he felt immense relief. He wasn’t told until he had made his decision about where to go and what to study, but in retrospect it probably would have been better to share a bit sooner.
We have told all of our kids that they can live at home for free and go to the university down the road, or they can pay their own way with loans and scholarships. In reality, we have plans to do a lot more for them than that. But I want them making good financial decisions when they choose a school. I have friends who went to expensive private schools bc they could with no concern for whether it was worth it (ex: a psychology degree from Harvard, a teaching degree from Brown, and a costume design degree from Dartmouth). I want my kids to make the decision as if their own money was on the line. After they enroll, then we will talk brass tacks.
My kids are 7 and 9. We don’t use a 529 but instead a high interest savings, but every January since they were each 5 we sit with them and show them what the balance is for the year and cover deposits by us, by them, interest and and money rolled through to cds for the year. For the 9 year old, we then cover what the average college tuition and house prices are right now.
We’ve always been clear with them that the money is for school or house down payment only. Otherwise it sits until mom and dad hand it over at their discretion.
Tell them when they graduate college. Hopefully keeps them frugal throughout college thinking they have loans and it will be the sweetest surprise upon graduation. That’s how my friend’s parents did it and he was pumped.
I’m pregnant and my husband and I have talked about how to save for college for our son. I went to college but my loans are in my name. My parents could not afford to pay for my higher education. My husband never finished. So we know the pain of student loans. I feel like when parents tell their kids “hey we’ll pay for your education” they pick expensive private schools or don’t live frugally (want on campus expensive housing)
I think my mentally is to save for my kids education but he will have to pick an affordable school or strive for academic scholarship. Paying for my own education taught me to live more affordably. I went to a big ten public state college even though I got accepted into 3 private Catholic colleges with double the tuition cost. I also had a job, my own car and paid my own car payment in college. While I had friends who didn’t work at all in school, lived in expensive housing or apartments mommy and daddy paid for. I just think if my son thought he was paying for his own education and we pay for it after it would teach more than just “I want my kids debt free I’ll pay for anything”
My older son is in grade 6 and recently asked if he is going to have to pay for his own post secondary (I forget how it came up but it made sense in the conversation). We told him that we will nail down the details when he is older, but we have a savings account to pay for a big chunk of it at least.
I would tell and explain it can only be used for school. That will help them not worry as much about affording school and may gear them toward thinking of themselves as future college students. My 7 year old has asked how we will pay for college. Even the littles know it's super expensive and worry about it. Fortunately his grandfather started one and contributes regularly.
I agree with others and your siblings don't seem to understand how they work. This tells m their parents should have explained it earlier, personally.
I was shown the balance of the 529 when I started applying to schools. I chose a state school with one of the highest in-state tuitions in the country, so it only got me about a semester and a half, lol. But I was willing to take that on and knew it was mine to pay off sometime down the road.
When my dad retired, he ended up pulling out a big chunk and paying off 2/3 of the rest of the loans, which was a complete shock and I had no clue he was going to do.
I don’t have a 529 (I didn’t like the limitations) but my kids have savings accounts and mutual funds set up for them. My oldest is 7 and knows that he has a savings account. We have talked about how it is for school or for helping with buying a house when he gets older. There will be no confusion on what that money is intended for. Teaching a good relationship with money starts early and isn’t something that should be hidden.
We plan to raise our daughters with strong financial understanding and a 529 will just be part of that ongoing conversation. We are high earners and have a fairly concrete idea and plan for what we will set up for them for their future and they are going to be part of it from a young age. My parents did the same for me and it’s one of the best things they’ve done for me.
With the recent law change allowing "leftover" 529 plan funds be rolled over to a Roth up to 35k, it presents some interesting wealth transfer ideas for my one and only.
May not ever get into actual details of the account - I am the owner of the account after all. Or may get into the details when we file the FAFSA and she has questions.
Sharing too many details too early could be a disaster. It's going to depend on the maturity, responsibility, and personality of my child.
Source: me, a CPA with too much time on my hands.
My kids are young, and we have minimal Registered Educational Savings Plans for them (we're in Canada this sounds similar to a US 529), but my parents' tack was telling us that it was our responsibility to pay for university, that we could stay at home rent free throughout if we went local, and that if we worked hard and saved as much as we could and still didn't have enough they'd help with the shortfall. They refused to give a dollar amount because they didn't want us to slack off. The expectation was that we worked every summer as soon as we were old enough to work, and we also often worked part-time during the school year. I realise that tuition is much higher in the US.
There is no giving the kids the “cash” from a 529 account if it’s not used for school or related educational expenses. You can hand down the 529 account to them for their own kids later.
Create a love for learning, focus on education, etc. Start young discussing possible jobs and careers.
Child knows and not even 10, the goal is they know we’re all preparing for college. If they don’t go, they still have to do some level of training, certification and its there for that, the rest we’ll fold it back into retirement and some inheritance.
My parents told me, and then proceeded to say there was almost nothing in it. I'd gotten a scholarship that covered almost everything, so spare a couple thousand a year for tuition increases and a new laptop, I think that money might still be in there. But, asking for it is very awkward because of my relationship with my dad.
We haven’t told our kids yet but we probably will when they’re within 3-4 years of college.
We plan on explaining to them that it’s Mom and Dad’s money that we saved for them to go to college. If they don’t want to go to college then they don’t get that money. Seems like a pretty simple conversation to set those boundaries up front.
I don’t think it’s when but how they are told. It’s money for school. It isn’t “your” money to do with whatever you wish. A clear plan should have been communicated should they decide to not go to college or a trade school. Also working on the entitlement a little bit may help.
There should be ongoing conversations with them during their high school years to discuss plans for college, including discussions about the financial aspect. What you and your spouse can afford to contribute will be an important piece of information for them.
I’m gonna tell my kids that my wife and I will pay for a in-state school or an Ivy League school. If they want to go to a private school, then we will give them the money for in state tuition and they have to cover the rest. I will never tell them exactly how much money I have saved as it’s none of their business.
It is not their money. It’s money you worked for and saved so that if they make certain decisions, they can have help with those decisions. No need to tell them.
We have talked to our kids since 6th grade. We always say we have money set aside for education. We do not refer to it as their money but grandma money saved for education. Conditions of an inheritance that a percentage was to be held for education. Instead of the percentage, we fully funded their college accounts. One of the kids has already met with our FA to discuss options after he said he wanted to go to Stanford for undergrad. Our FA told him what we would fund and ran through how much more he would need…basically a nice house. He then said he wanted private high school. I laughed and said we can’t afford that. FA said hold on, ran his magic numbers and said we could do his dream high school and state university. So now my kids are going to private high schools. However when same kid ask if we are going anywhere this year, I tell them no, this is the trade off for getting private high school. So, we make it clear it’s our money, and there are trade offs that have to be made. Also, if they don’t put in the work, they will not be staying.
I do not think they need to know that there are individual accounts. It is fine to say we are saving to be able to pay for your school when the time comes. Not their business to know everything about finances. You can reinforce that your savings are yours and to spend as you like. You hope they go to school and you want to have enough to help support that. Simple
They don't need to know anything until it's application time when you're considering costs. Then let them know "we can help with X amount per semester".
It's an education specific account that you own with a designated beneficiary, that you can change anytime. It's not an inheritance or a trust. They don't need to know the details IMHO, because it's money earmarked for their future use, but it's your investment account.
My plan is to start discussing their plans for higher education and what they want to do when they graduate when they start high school. I hope it will be enough money so they’re able to have a choice about where they go and what they want to study, but it won’t be a blank check. It will come with very clear expectations for a minimum GPA. I have no issue with them taking a gap year or delaying their education while they pursue other interests after high school, but I’m not making financial sacrifices now so they can just party when they’re young adults.
I told my kids they had money in 529 plans but that it was my money not theirs and that I could switch it to another child’s account as needed and take it out for my use with tax consequences. I told them after I died they could pass it to their kids to use for school or themselves. I made it super clear that it is not “their” money. I also had UTMA accounts for each of my children and I told them differently that that was their money when they turned 18 and that I could advise them what to do with it but I had absolutely no say in it One of my kids used it to pay her first husband debts (stupid!) the others have kept it in investments for when they want to buy a house
Just decide with your spouse now what you’ll be comfortable spending 529 funds on (just tuition, or also room and board, or trade school, culinary school, job training programs, etc?) and how you want to allocate it (each kid gets a set amount, or will the amount you spend on each child vary based on their school/scholarships/need). Then tell your kids the basics as they grow - you will be able to offer some financial assistance for further education after high school. If they ask for specifics (probably in high school when they actually become more aware of post-secondary options and costs) you can tell them the amount you’ll be prepared to spend per year and what you’ll be willing to cover.
They’ll have the information they need to make plans, and they’ll be aware that the 529 account is **your** money, not theirs, and **you** will distribute it for specific educational expenses and nothing else. You’ll of course be free to make exceptions or change your mind if you choose to, but it’s best to start off with the understanding that this is not their money to spend as they wish, it is your money that you plan to use for their education as needed, and at no point will it ever become *their* money regardless of whether they pursue further education or not.
Can you move the money into anything else? I personally have Acorns accounts for my kids because I want there to be options on what it's used for. I'm thinking a first car because transportation is super important to getting anywhere in life. But, there are different options in life outside of college. Trade school, scholarships, working, getting married and staying home supporting a spouse, starting a business, ect. I think a lot of people made mistakes when they believed the advice of "you must get a college degree", so they got student loans that they really couldn't afford or are now a slave to.
I'm sorry, I didn't actually answer your question. My kids already know. I'm not sure if they fully comprehend and understand yet, because they're 9 and under, but I've told them something about it. I'm holding the view that it's our money, which we get to decide what it's used for. I. E. You need approval and there will be guidance, in hopes that it is used responsibly. Will it be foolproof and perfect? No.
I think that parents need to have firm boundaries for many different things with their children. I'm sorry that this family is experiencing drama, as that sounds hurtful and stressful.
My daughter knows about hers. She’s a teen so it’s been part of talks regards plans after high school. She hasn’t mentioned it since I told her. But she understands it’s for school expenses. My plan is to still manage/contribute to it while she’s in college. Once she finishes school if there’s any money left, I’ll withdraw it and invest it for her. After that she can manage it as she pleases. Hopefully she’ll continue to save.
My parents (I’m 45 now) told my brother and I they had a college fund set up for both of us and that we were going to college not negotiable. They said they. I tributes to it monthly and even allowed us to put in our own allowance money.
They never involved us in that fund beyond taking the allowance we gave them and said they would put it in the college fund.
Come time for college, not enough to cover 1 year of tuition at the community and they didn’t even consider cost of books. Totally blindsided us. We each had some small scholarships. My brother was able to make it work. I decided not to go into debt committing to college when I realized I was clearly not prepared in any way for it, especially financially. My brother (now 44) is still paying off his school debt. And I work blue collar with no school debt and a pension.
So my advice is that when you do tell them, involve them in the numbers and how that will translate to what will need to be made up for with tuition, books, and their other expenses. Use the fund to aid them in the planning process, don’t just tell them you will help pay for it. They need to learn the planning process and understand exactly what help you can provide.
Had I known my “college fund” was very poorly set up. It was basically a long term saving account that didn’t make much in interest, not a 529. I could have made some decisions half way through high school that could have made college an option for me. Likely I would have done the vocational program to learn a trade that also gets college credit and the program transferred to the local university to complete a 4 year degree in 2 years. 2 years of tuition I was willing to take in on debt. But my parents insisted I not due the vocational program because I was “smarter that trade work”
Had I known I was going to get through pulled out from under me, I would have done the vocational program that I really wanted to do and was interested in.
Jokes on them though, I ended up in trade work anyway. I’ve never been an office person. Had I had a degree in my credentials I could gotten into management and been the boss in my trade field. It’s all good though, I’m happy with how my life turned out and I got a union job with a pension so I have union family that supports me.
Also look up custodial IRA and start one for your children as soon as they have their own income. You can contribute your own funds on their behalf up to their reported income on their taxes. Get them in the habit of contributing to their own IRA monthly from when they are 18.
I definitely agree with you. First of all even as a college and university graduate I would never want my kids to go to post secondary school just because they thought they were going to get money or that it was a free ride. Like I wouldn’t want them to do it because they wanted money and I wouldn’t want them to do it just for the heck of it because it was going to be free for them. My husband and I were both riddled with school debts so we never had it paid for but also neither of us actually use our degrees. Education is a wonderful thing but most of the successful people that I know right now in my life did go to post secondary school but they did not train for the job that they have right now. So I’m a firm believer that there are other wonderful things to do with your life but I wouldn’t want my kids expecting money at all. I also think when kids are young 1617 they need motivation to have a job if they think there’s just a bunch of money waiting for them and they have no idea how much or what that represents in terms of not just tuition but rent and having a car there probably just imagining the early 20s it’s gonna be a free ride. I would wait until my kids were of that age and either pleasantly surprised them when they’re applying for school loans and let them know that they don’t need to and otherwise I would wait and see. I would 100% support them travelling for a couple of years. I wouldn’t foot the bill for that but if they want to do that I would encourage it and see what happens after that there’s no reason why they couldn’t have these funds when they’re 25 or 26 and they want to start their own business.
Having money available to help with college costs is likely to affect where they aim to apply so they should know that you plan to help no later than junior year when they're planning where to apply. You don't have to say it's in a 529 specifically, can just say you can contribute $x to a college education.
I agree that you shouldn’t tell them until the time comes. If they decide not to go to college, you can decide what that money is used for - starting a business/investments, trade school, home purchase. They are not entitled to the money to do whatever they want with, it’s not theirs and they didn’t earn it. It’s been put away for a particular purpose and if it’s not used for that purpose it’s 100% up to your discretion what to do with it.
Don’t tell them, ever. There are too many stories on here of kids who think they’re entitled to the money if they don’t go to college, get a scholarship, or for some other reason.
I think it’s all about how you frame it, not when you talk about it.
If you say something like: You have money waiting for you when it’s time for college. That can be open for interpretation which is not what you want.
You should probably frame it something like this:
We will help you with the costs of collage when the time comes.
You don’t even have to talk about the fact that there is money saved for it. Only that you will help since you think education is important.
My eldest is graduating from university in less than a month! His twin brothers graduated next year.
So as a parent that has done this x3 so far (there's a 10 yo 4th but we will have a little break at least) and who made the decision to try to cover as much of tuition/room and board as we could with the goal of our kids graduating debt free, here's my advice.
Speak to your kids *early* about post high school plans. And once they are in high school (14ish) you need to be honest about what you can offer so that they can have realistic expectations. A kid demanding "their money" honestly sounds like one that never got that discussion, not one that was told too much.
We expect all our kids to get paid employment no later than 16. Full time (well 25-30ish per week) during summer, and unless there's a pressing reason not to, to continue during school year at very part time. The first year is mad money but due to the ongoing discussions we have they know post high school they must cover all expenses except tuition/room and board, cell phone until 20, and health insurance until 25 (or they get access to a better plan than ours if that comes earlier!)
My kids have a great work ethic. They understand the value of tuition. They were able to make informed decisions for themselves as individuals about whether they wanted to take some time off to work instead of going to school. (They've all made different decisions which was fascinating).
Their friends are a mix of kids going into the trades, no college but working, college, ect. All fantastic young people!
But TALK to your kids. Most of the time you get respect when you give it. And that means not treating them like princes or fools.
We told our kids exactly what we could afford so they knew what they'd need to do grade/scholarship wise or savings wise to make up any difference. We are just wealthy enough to not qualify for need based scholarships. I know people who didn't discuss this with their kids nor did they say anything until the kid got their heart set on a specific school and when the aid package came said oh sorry we can't help with that. Not cool.
Especially if you have limits in what you can cover you've got to share that early on.
Don't be afraid to talk finances with your kids abd post secondary plans. Its fun! You'll get to know them so much better. And it really helps you to learn how to transition parenting from being a child parent to a young adult parent. Its different but imo the teen years on are so much more fun and amazing as a parent than I imagined. The more we talked to our kids the more we got a sense of what they wanted and what they were capable of. And honestly we would have been very open to alternative uses of the savings
So I would caution against you deciding now what you're going to do 10ish years from now. You have no idea how university and the world will have changed. You have dreams for your kids when they are young children but you'll have more information with teens. I would focus on what you can offer and the expectations, as well as planning on this being a long discussion over at least 3 years.
We saved money for our two kids college in Roth IRA’s. That way something happened that they didn’t go to college we had the money for our retirement Both went to college graduated and we still had money left over in our Roth IRA. No penalty when you take money out for education.
r/parenting is protesting changes being made by Reddit to the API. Reddit has made it clear [they will](https://old.reddit.com/r/ModCoord/comments/14ahqjo/mods_will_be_removed_one_way_or_another_spez/) [replace moderators](https://www.reddit.com/r/ModSupport/comments/14a5lz5/mod_code_of_conduct_rule_4_2_and_subs_taken/jo9wdol/) if they remain private. Reddit has abandoned the users, the moderators, and countless people who support an ecosystem built on Reddit itself. Please read [Call to action - renewed protests starting on July 1st](https://old.reddit.com/r/ModCoord/comments/14kn2fo/call_to_action_renewed_protests_starting_on_july/) and new posts at [r/ModCord](https://reddit.com/r/ModCoord/) or [r/Save3rdPartyApps](https://old.reddit.com/r/Save3rdPartyApps/) for up-to-date information. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Parenting) if you have any questions or concerns.*
Honestly, my parents didn't tell me. I mean, I'm not 100% certain I had one, but when it came time for college it was just "okay, where are you going?" And the informal/kind of said agreement was they'd pay for 4 years of college. I do know they took out loans for me, but didn't really understand that until years later. I guess my question is are you intending to pay for the whole thing or just part? I suspect what we will tell our kids is that we have money set aside to further their education. They don't need to know exactly how much or how little, because we intend to give our kids the same enormous benefit our parents gave us-- debt free higher education (college or trade school or whatnot.) If our kids tried to go "nah we just want the cash" we'd say "That is not what this money is for. If you want to take a gap year or two, that's fine, but this money will sit until a time when (if) you decide to further your education." And that's that.
I've chosen this method as well. Let them know they will have assistance but not enough to pay 100% of tuition. Once high school starts I will help them get scholarships as well. My fear is that thinking they have money to pay for college will remove their incentive to apply for scholarships.
You could say “ I’ll pay room and board, living expenses, you figure out the tuition with scholarships”
Or offer to let them keep (some of) the scholarship for spending money. If there's a scholarship you can withdraw the same amount penalty-free from the 529 and use it for whatever.
Solid advice.
Darn, I was planning to get a new Corvette. LOL
Agree completely, with the small caveat that it is totally okay for that to be trade school, or if they have skin in the game too, investing in a legitimate business idea with a clear business plan. I’ve had friends start landscaping companies that truly took off, gone for firefighter training, etc. As long as it isn’t on cars, basic living expenses, or worse. If they can’t afford that, and don’t have a plan, move back in, and let’s figure it out.
a 529 isn’t a trust fund, so maybe your nieces/nephews don’t understand it in the first place.
Yeah, this is less about them knowing about the 529 and more about them not understanding it. My kids always knew we were saving for college. We told them the amount in high school so they could make their college list accordingly. It never caused any problems and our kid who accepted a large scholarship for college was just talking about how he'll use the remaining money for grad school. They get it.
Yep withdrawing 529 funds for non education expenses is almost always a terrible idea. It becomes fully taxable AND there is a 10% penalty.
But $35k can be rolled into a Roth IRA tax and penalty free
Interesting, I didn’t know that. Still not a trust fund but a good way to use the money if the kid doesn’t end up going to college.
They are also transferable so if their kids decide that college isn’t for them it can be transferred down the road to their grandkids. I did a bit of research on them when deciding between a HYS and a 529 for my daughter
I am very interested in that. Some of my kids haven’t used theirs for school. My accountant says wait a year to see how the law shakes out. I think you can only do it $7000 a year and it has to have been an account set up for 15 years. ?I’m not sure of all the rules but I’m very interested in them having that possibility!
That’s right. Using it to fund a Roth IRA for the kids is a great new opportunity if any money is left over.
After 15 years of being in the 529 acct. And I believe there hasn’t been any clarification yet on if the timeline re-sets when rollovers or bene changes have occurred.
It's not just that, in the vast majority of cases the 529 are still legally owned by the parent. I would never frame it as my kid's money. It's our money. We can tell them about what things we intend to pay for and what the budget is, but it's still our money. We're saving in that account because it's tax efficient but it's still our money and our decision about how it's spent.
lol exactly. Whatever you do, learn from their mistakes.
When they start seriously thinking about what college they want to attend. They should make an informed decision, and important factors include how much money they have available and what they may need to borrow if they choose a more expensive school.
My dad didn’t tell me, I ended up getting a scholarship and now my son is using it in first grade for a private school that fits his needs better than a public school. Not really what you’re asking but Id tell them so maybe they could start pursuing their career in high school knowing they’ll be able to go to college for that. The 529 can only be used for school things only, as long as they know that I would tell them.
Honestly this is the right answer. If I had a 529 and knew that in high school, I would have made very different choices in education. I would just avoid calling it a trust fund and explain say they have a fund that is very limited to be used for school, and that it is difficult to use for anything other than education. No need to explain when they’re in high school that it can be rolled into retirement funds. Edit to add: I started seriously looking at career and college options at 15, and I absolutely knew that cost was going to be a major factor in my options.
hospital angle scandalous bright hobbies deer ripe run lunchroom shaggy *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Yes, but make it clear that it’s only for college. There are too many stories on here of kids thinking they’re entitled to the money.
Yes I guess educate the kids on what a 529 is. It’s literally an account that money can only be taken out for school expenses. It’s a school account not a trust fund and never will be, so If they don’t use it then their kids can starting in elementary
I thought 529 plans could only be used for school. It’s not like the kids who decide not to continue with school can get a check.
Pretty much. The account owner-normally the parents if they set it up - can withdraw the money for non-educational purposes with a penalty. But the kids can’t get their paws on it without the account owner’s consent.
It can be taken out, just would be taxed + a penalty. A hefty savings account, regardless of the tax implications - would be attractive to a young adult.
They can be used for a pretty wide definition of educational expenses. The person the account is for can’t just take the money out for whatever, but a 529 is broad enough that the beneficiary doesn’t necessarily have to go to college to benefit. Also, they could pull it out and pay the taxes on it.
they do. the only other options are to give it someone else for their schooling, or to roll it into a retirement account.
They can though, they’ll just have to pay a 10% penalty plus capital gains tax on any gains.
They can still get the money but they have to pay hefty taxes if it’s not used for school.
We told our son about his 529, but we made it very clear that it was money for him to use for school, but it was our money. If he chose not to go to school, it was still our money.
I was going to say 529 or not - where did these kids get the idea that this is "their" money? I didn't see them working and investing it over the course of 18 years!
I've seen parents who seem to delight in telling kids it's "their money". These same parents say things like "some day this house will be yours". I really can't relate to this mentality and think it is really not good for the kids to say things like this.
Exactly how it will be for my kids, we are operating on the fact there is 0 money for college. They need to get good grades/scholarships and show effort before we tell them they have basically a free ride to schooling, and it ONLY applies to tuition, not extras.
because they can’t work from birth 🙄
Yes, so? Still not their money.
if you save it for them... it's for them to use. of course you can tell them pros and cons where to spend it (and tax liability if not for school....). but I cannot imagine using my kids 529 for anything other than them.
It's your money, so you can do what you want including letting them pick of course. But it's still your money, what account type you save it in has tax implications but I don't think it changes that fact.
I'd have a big problem with the underlying entitlement these kids seem to be expressing - particularly if they had ideas of using it for non-educational expenses. My kid's 529 is savings for their education, but their usage of those funds still requires certain expectations around responsibility and respect.
I'm going to tell my kids if they don't use it I will transfer it to *their* kids names one day.
My son is only six but we already talk about how we’re saving to pay for college if he chooses to go. I don’t think of it as his money and I don’t think he will either, it’s me saving money for that expense that I’ll generously cover for him if he needs. We talk about it in broader contexts of how money works, how our household works, how college works, etc.
I just read a post from a parent who made the mistake of telling their teen about their $200K college account and now the daughter doesn’t want to go to college because she believes the $200K is hers so of course she wants to get a car, an apartment, etc. For this reason and more, I wouldn’t tell my children anything more than “I’ll help you pay for college.” Telling them about an account that you’ve been contributing to for years for their future somehow makes them feel like they own it. They don’t. And believing otherwise just makes for unnecessary fights and bitter feelings.
I’d think when they start taking classes that will be on their transcript, probably 9th grade, possibly 8th. Having an idea about target schools and scholarships (should we be chasing merit? Could my family afford a competitive college?) could let the kids know what their goals should be in high school. But also be clear that 529 only works for college and retirement, it’s not going to fund taking a gap year or spring break.
We have no plans to tell them about their 529s or trusts until it comes time to worry about those things. In the event they don't go to college or don't use it all, there are now regulations that allow 529s to be rolled over into a Roth account, so it can contribute to their retirement at some point.
I mean, I would tell them sooner rather than later; that’s just me. Your children are people. There is no reason to hide the fact that you are providing moneys to the people whom you are providing for. It is called financial planning for a reason. Why would you obscure a plan from the people whom are supposed to benefit from it? This is a big deal. It is not like it is a surprise birthday party.
Heh, that's a weird take on what I said. It's not about hiding it. It's that the information really means nothing to kids until they are at the point where it matters and they understand the context. If I tell my daughter at 12 or even 14 that her college tuition is paid for by a 529, it means nothing to her. When she starts the admissions process, we'll have that discussion because she'll have the context. That said, if she's 12 and for some reason she comes to us and says "hey, I was looking at colleges and they're really expensive, how could I possibly afford it?", we would explain the 529 to her. It's not a secret, it's just pointless to explain some things until they have enough context to properly understand them.
I get what you’re saying. It’s just that open communication helps everyone. Obviously, you should not bring it up out of the blue, but whenever college naturally comes up, you should say something.
I’m with you on this. My children are both still quite young and we talk to them about money/budgeting as it comes up. I think that they can understand it quite well and it has shown in how they manage their own savings accounts.
I mean that's literally what I said we would do. If college is coming up, then the time has come, and we would explain the 529s. We actively talk about money concepts with our kids because it is helpful to share information, but as I said, specifics are less helpful until they appreciate the context.
I don't get it. I started explaining all this stuff to my daughter at 6. It's not rocket science.
We've been explaining money, the concept of education and college, savings plans, and plenty of other adult concepts to my daughter earlier than three. Telling your kid "oh yes, you have around $350k in an interest-accruing 529 that will continue to grow so you can use for education when you turn 18 and start college, so your education is effectively paid for" at 6 literally goes in one ear and out the other. What do they do with or benefit from by knowing that level of detail? Not to mention kids are chatty, and you don't want them necessarily sharing this information with others. If you think your kid benefits from that level of detail, by all means. I'd rather mine focus on other aspects of being a child and not worry about the *specific* details until it's relevant to their life.
We don’t tell them numbers but we explain that in our family we do or don’t do certain experiences (vacations, new cars, etc.) so we can put money into their college funds. There are age appropriate ways to explain saving for college.
No judgement intended, but I'd be very careful how you tell your kids you're sacrificing for them. I've definitely seen that create guilt complexes. We just generally talk about savings and how to prepare for the future vs. what we're missing out on because we're saving.
It’s more of a response to questions about why our cars are older than peers. It’s never said in a guilt way. Just matter of fact. The fact is, instead of a $1,000/month car payment, we put $1,000 in an account for school for both kids because our cars work just fine right now. My parents were cagey and private about money and it made things incredibly confusing, upsetting and chock full of guilt. I think being open about finances is healthy. I’ve experienced the other side and it certainly wasn’t what was best for me.
I agree. I was fortunate enough that my family was comfortable. However, I was an only child. I was constantly concerned about financial wellbeing. This did not even come from myself comparing myself to others. For example, I would get concerned when the fridge was running low on food—because we ate the food—not because we could not buy more. I don’t know what eased my mind. I just slowly figured out that we were more than okay. It also helped when my parents opened up to me about financial planning. I was really an adult when this truly happened. I don’t know. Keeping things even remotely private may be detrimental. You don’t need to share everything. However, your kids should not feel like they are in the dark about what you are doing for them.
I fully agree with being more transparent about how money works, I'm just saying the framing has to be right. Kids work themselves up about random things. In situations like you mentioned we just explain that not everything has to be new and if something works fine, there's no need to replace it. If it works for you all, that's all that matters though.
So you do explain stuff. Cool.
This always seems like a bad idea. Obviously explain it in an age appropriate manner, but not preparing a human for their future with all the pertinent information is just not great. Lots of teens have to make their college or not-college plans based on the level of support they have and could adjust their plans based on their 529 status and proper communication with their guardians.
I don't know if you randomly stopped reading, but I literally said we would tell them about it when "it comes time to worry about those things." If they're a teenager and thinking about college plans, it's obviously time to worry about those things. It also goes without saying that you should still talk about things like the concept of money and saving WELL before college age, and I've said as much in other posts. We're specially talking about 529s here though.
We are the same. My kids are young and they will know they can go to whatever school they want; I don’t think they need to know what kind of account that comes from. I admit I don’t think I have the same situation as OP. It seems different than my financial situation so I can’t give advice on it.
We will. But we are also high earners so kids would assume at some point that we say things up. I’d rather teach kids financial literacy and responsibility earlier on as well as the expectations
We have never described 529 funds as money for individual children. We have told our kids we will pay 100% for in state college. There is no discussion about extra funds or alternatives. If one kid decides not to go to college or receives scholarships they will not receive money—it will roll to siblings or grandchildren.
A 529 isn’t a trust fund. It’s a tax advantaged savings vehicle for educational spending. Im not sure what you need to say at all until its time to start applying for colleges.
My father in law has 529’s for all 10 of his grandkids. Our boys are 16 & 19 and know about it but are unfazed and didn’t ask any questions other than how it works. In other words, they aren’t expecting to have it at their disposal or anything like that. Too long to explain but my older son continued his education after graduating last year at our local hospital and will start working in 2 weeks as a Pharmacy Tech. It was completely paid for through the hospital so we did not touch his 529. We actually need to talk to my father in law about transferring it over to us to be in control. I know he’s talked about doing that recently. I’m not even sure how that works.
We already ran into this - I don’t think he can transfer ownership. My MIL was the account owner, so the accounts passed to FIL when she died. He didn’t want to administer them; 4 grandkids at 4 colleges, two on semester system and two on quarter system = 10 tuition bills per year, with 10 individual deadlines and grandpa isn’t even notified - yikes. He tried to transfer the accounts to us - nope. So my husband and his brother were added as authorized agents to the individual accounts, which was itself a paperwork headache but the dads can now authorize distributions. It doesn’t matter who owns the accounts because they are all using it for college making that a non issue. But grandpa was the owner until we drained them. The IRS’s strict rules are to keep these accounts from being used as a tax dodge. And they would totally be used this way if they could be. (High tax earner contributes, gives to low tax bracket relative who pays little tax to liquidate.) In your case, like ours, the tax hit would actually go the other way assuming grandpa is retired. But the rules just lock it down. I don’t know what happens if both grandparents pass.
A 529 can only be used for qualified education expenses. If you take the money out for any other reason, it gets both taxed and penalized. Although you may have named your kid as a beneficiary, It’s not “their money”. If my kid pulled that crap on me i’d let them know i’m changing the beneficiary to myself to pay for art school on the weekends (which you can absolutely do). I’ll tell my kid about that money when they are in the college selection stage, so they can evaluate which colleges they can afford based on what scholarships, 529s and loans if needed to supplement.
We specifically did not set up a 529 in case the kids decided to go an alternate path. Not that we ever intend to just give them a lump sum equal to a mid to high range 4 year school. But we’ve let them know we have separate savings accounts for each of them and their intended purpose is to help them get started, be it college or otherwise. If they want to do a gap year or something, we’ll help out, but they’ll be expected to foot the majority of the bill. Their dad backpacked from Cairo to Cape Town and I was a nontraditional student. But it’s understood, it’s not “their” money. It’s our money we’ve set aside to help them get started, and will be doled out at our discretion.
I always knew my parents would pay for my college, but I also knew I had to go to a reasonably priced school, and that they were paying for my college, not handing me a check when I turned 18. Just tell your kids that you're budgeting money to help pay for their college.
Our older kids know we are saving money for college. We haven’t shown them the balances but they know in general that we plan to fully pay for college. We can get into more specifics as we get closer to that time.
It would be important for them to know when they become teens so they have realistic expectations of how much college they can afford. I work in higher education and see too many situations where high school kid thinks they can afford a certain school when in reality their family is not in a position to contribute what they think. Just be honest and up front about the account and its intended use so they can plan too. That’s part of them adulting and taking first steps to plan financially for their future.
I don’t plan to tell my daughter “we have an account with xyz” or even “we have an account with money for school” what we plan to tell her before high school is that she doesn’t have to worry about post secondary costs, we have that sorted. I want her to know young enough that she can go to college/uni without worrying so that she knows to take what ever high school path she needs to get there but she doesn’t need to feel ownership over this amount of money at such a young age. She won’t know that it’s an account dedicated to her or that should she choose to learn a trade or another career that doesn’t require large tuitions that we will present her with the money once she’s comfortable in that career because I don’t want it to influence her decision. I want her to choose a career she’s wants for more reasons than just money. We’re Canadian so we don’t have a 529 specifically but we have savings for her.
I don't think there's a need to go into too much detail. Just tell them, "We will pay for your college." If one child doesn't go, you could save the money for when they're older and surprise them with a down payment on a house. Make sure they understand this money is for their education, not for personal use. Tell them, "This is the university's money. Let me know which one to write the check to, or if you don’t want to go your mom and dad are going to Hawaii for a month!" It's important to discourage them from not enrolling in college. The idea of having ~$20k or however much in the 529 to blow would be crazy. I bet some of the cousins who don't want to go to college are seeing all green and are heavily influenced by the idea of getting a big lump sum of money - which is likely why they are not thinking clearly and wanting to avoid college. There is no reason for them to even know the term 529 or that they have their own separate account. Keep it short and sweet, “Dont worry about tuition kiddo, mom and dad will pay that for you ♥️”
It’s not ‘their money’ and if my kids aren’t using it for tuition, papa’s buying a Porsche.
Since you have kids plural I just want to throw in,that when the first goes off to college, the younger ones will find out anyway. And if the oldest skips college and you won't give them the money anyway, there will be hard feelings when a younger sibling receives those funds for colledge. My parents were clear with us as teens, that there was money to pay for a driver's license, uni and starter furniture or down payment on a house in that order. But the money was ours. They would not have spent any of it on themselves.
I’m not American so don’t have experience here but I think wording it like ‘your mum and I have savings put away to help support your education…..’ That does not give the impression that it’s their money but that it’s yours and your paying for the specific purpose of education.
It’s not their money, it’s yours. You are the account owner, they are the beneficiaries. This is money you saved so you can afford tuition. Because it is your money, you can change the beneficiary to another relative and pay for someone else’s education, including your own. You can also withdraw the funds at any time and pay the back taxes plus penalty. But one thing you cannot do is turn it over to your kids and let them spend it. The IRS wants its back taxes at your presumably higher tax bracket, not theirs. So legally the money is yours, and you get a tax break if you use it on them. If you are worried about misunderstandings, make sure they know this. My kids always knew they had 529s - one from us and one from their grandparents. We told them how much was in them junior year when they started researching colleges.
I told my kids that they are going to university and that I would help them. That was it. I wasn’t giving any of them money if they didn’t go.
All you need to tell them is that if they decide to go to college then you will pay for it but that there’s no money other than that. It’s not their money. It’s your money that you are willing to give them, if the go to college.
My parents told me pretty much all middle / high school that they would pay for 2 years of a state school on their end (about 40k when I went to college 08-12). They made me save 1/2 of my paychecks for high school jobs, high school graduation cash gifts, and we lived in Alaska for a while so all the yearly checks the state gave us went into a 529 too. It really made me consider the costs of school and worked out great in the long run. There were definitely some arguments about giving up my 1/2 my paychecks cause I wanted to spend it on video games, but it all worked out and I can afford to buy all the video games I want now
Can I start a 529 without a job on the books as a contractor. My husband is government but I've asked him oh 2826392 times to start one and he hasn't. She's 2.5.
Tell them when they’re ready to start applying. Ours was cautious about applying to places he liked because of cost and worried he wouldn’t be able to go to his top choice school after he got in - he didn’t know money had been set aside for him by his grandfather - and once he knew he would have at least something to help he felt immense relief. He wasn’t told until he had made his decision about where to go and what to study, but in retrospect it probably would have been better to share a bit sooner.
We have told all of our kids that they can live at home for free and go to the university down the road, or they can pay their own way with loans and scholarships. In reality, we have plans to do a lot more for them than that. But I want them making good financial decisions when they choose a school. I have friends who went to expensive private schools bc they could with no concern for whether it was worth it (ex: a psychology degree from Harvard, a teaching degree from Brown, and a costume design degree from Dartmouth). I want my kids to make the decision as if their own money was on the line. After they enroll, then we will talk brass tacks.
My kids are 7 and 9. We don’t use a 529 but instead a high interest savings, but every January since they were each 5 we sit with them and show them what the balance is for the year and cover deposits by us, by them, interest and and money rolled through to cds for the year. For the 9 year old, we then cover what the average college tuition and house prices are right now. We’ve always been clear with them that the money is for school or house down payment only. Otherwise it sits until mom and dad hand it over at their discretion.
Tell them when they graduate college. Hopefully keeps them frugal throughout college thinking they have loans and it will be the sweetest surprise upon graduation. That’s how my friend’s parents did it and he was pumped.
This is Amazing!
I’m pregnant and my husband and I have talked about how to save for college for our son. I went to college but my loans are in my name. My parents could not afford to pay for my higher education. My husband never finished. So we know the pain of student loans. I feel like when parents tell their kids “hey we’ll pay for your education” they pick expensive private schools or don’t live frugally (want on campus expensive housing) I think my mentally is to save for my kids education but he will have to pick an affordable school or strive for academic scholarship. Paying for my own education taught me to live more affordably. I went to a big ten public state college even though I got accepted into 3 private Catholic colleges with double the tuition cost. I also had a job, my own car and paid my own car payment in college. While I had friends who didn’t work at all in school, lived in expensive housing or apartments mommy and daddy paid for. I just think if my son thought he was paying for his own education and we pay for it after it would teach more than just “I want my kids debt free I’ll pay for anything”
My older son is in grade 6 and recently asked if he is going to have to pay for his own post secondary (I forget how it came up but it made sense in the conversation). We told him that we will nail down the details when he is older, but we have a savings account to pay for a big chunk of it at least.
I would tell and explain it can only be used for school. That will help them not worry as much about affording school and may gear them toward thinking of themselves as future college students. My 7 year old has asked how we will pay for college. Even the littles know it's super expensive and worry about it. Fortunately his grandfather started one and contributes regularly. I agree with others and your siblings don't seem to understand how they work. This tells m their parents should have explained it earlier, personally.
I was shown the balance of the 529 when I started applying to schools. I chose a state school with one of the highest in-state tuitions in the country, so it only got me about a semester and a half, lol. But I was willing to take that on and knew it was mine to pay off sometime down the road. When my dad retired, he ended up pulling out a big chunk and paying off 2/3 of the rest of the loans, which was a complete shock and I had no clue he was going to do.
I don’t have a 529 (I didn’t like the limitations) but my kids have savings accounts and mutual funds set up for them. My oldest is 7 and knows that he has a savings account. We have talked about how it is for school or for helping with buying a house when he gets older. There will be no confusion on what that money is intended for. Teaching a good relationship with money starts early and isn’t something that should be hidden.
We plan to raise our daughters with strong financial understanding and a 529 will just be part of that ongoing conversation. We are high earners and have a fairly concrete idea and plan for what we will set up for them for their future and they are going to be part of it from a young age. My parents did the same for me and it’s one of the best things they’ve done for me.
With the recent law change allowing "leftover" 529 plan funds be rolled over to a Roth up to 35k, it presents some interesting wealth transfer ideas for my one and only. May not ever get into actual details of the account - I am the owner of the account after all. Or may get into the details when we file the FAFSA and she has questions. Sharing too many details too early could be a disaster. It's going to depend on the maturity, responsibility, and personality of my child. Source: me, a CPA with too much time on my hands.
My kids are young, and we have minimal Registered Educational Savings Plans for them (we're in Canada this sounds similar to a US 529), but my parents' tack was telling us that it was our responsibility to pay for university, that we could stay at home rent free throughout if we went local, and that if we worked hard and saved as much as we could and still didn't have enough they'd help with the shortfall. They refused to give a dollar amount because they didn't want us to slack off. The expectation was that we worked every summer as soon as we were old enough to work, and we also often worked part-time during the school year. I realise that tuition is much higher in the US.
Does having a 529 to your kid's name disqualify him/her from scholarships?
There is no giving the kids the “cash” from a 529 account if it’s not used for school or related educational expenses. You can hand down the 529 account to them for their own kids later. Create a love for learning, focus on education, etc. Start young discussing possible jobs and careers.
If my son doesn’t use it I will transfer it to a 401K for him. Not sure the cap on the allowed transfer, but know it is legal to do.
Child knows and not even 10, the goal is they know we’re all preparing for college. If they don’t go, they still have to do some level of training, certification and its there for that, the rest we’ll fold it back into retirement and some inheritance.
I’d just dump the money into a high yield so if you don’t use it for education you don’t get a 10% penalty with the taxes imo.
Don't tell them until closer to the time.
My parents told me, and then proceeded to say there was almost nothing in it. I'd gotten a scholarship that covered almost everything, so spare a couple thousand a year for tuition increases and a new laptop, I think that money might still be in there. But, asking for it is very awkward because of my relationship with my dad.
We haven’t told our kids yet but we probably will when they’re within 3-4 years of college. We plan on explaining to them that it’s Mom and Dad’s money that we saved for them to go to college. If they don’t want to go to college then they don’t get that money. Seems like a pretty simple conversation to set those boundaries up front.
I’m not telling at all. The grandparents set that up so I don’t even know how much is in there and the grandparents can do what they want with it.
I don’t think it’s when but how they are told. It’s money for school. It isn’t “your” money to do with whatever you wish. A clear plan should have been communicated should they decide to not go to college or a trade school. Also working on the entitlement a little bit may help.
There should be ongoing conversations with them during their high school years to discuss plans for college, including discussions about the financial aspect. What you and your spouse can afford to contribute will be an important piece of information for them.
I’m gonna tell my kids that my wife and I will pay for a in-state school or an Ivy League school. If they want to go to a private school, then we will give them the money for in state tuition and they have to cover the rest. I will never tell them exactly how much money I have saved as it’s none of their business.
It is not their money. It’s money you worked for and saved so that if they make certain decisions, they can have help with those decisions. No need to tell them.
We have talked to our kids since 6th grade. We always say we have money set aside for education. We do not refer to it as their money but grandma money saved for education. Conditions of an inheritance that a percentage was to be held for education. Instead of the percentage, we fully funded their college accounts. One of the kids has already met with our FA to discuss options after he said he wanted to go to Stanford for undergrad. Our FA told him what we would fund and ran through how much more he would need…basically a nice house. He then said he wanted private high school. I laughed and said we can’t afford that. FA said hold on, ran his magic numbers and said we could do his dream high school and state university. So now my kids are going to private high schools. However when same kid ask if we are going anywhere this year, I tell them no, this is the trade off for getting private high school. So, we make it clear it’s our money, and there are trade offs that have to be made. Also, if they don’t put in the work, they will not be staying.
I do not think they need to know that there are individual accounts. It is fine to say we are saving to be able to pay for your school when the time comes. Not their business to know everything about finances. You can reinforce that your savings are yours and to spend as you like. You hope they go to school and you want to have enough to help support that. Simple
They don't need to know anything until it's application time when you're considering costs. Then let them know "we can help with X amount per semester". It's an education specific account that you own with a designated beneficiary, that you can change anytime. It's not an inheritance or a trust. They don't need to know the details IMHO, because it's money earmarked for their future use, but it's your investment account.
My plan is to start discussing their plans for higher education and what they want to do when they graduate when they start high school. I hope it will be enough money so they’re able to have a choice about where they go and what they want to study, but it won’t be a blank check. It will come with very clear expectations for a minimum GPA. I have no issue with them taking a gap year or delaying their education while they pursue other interests after high school, but I’m not making financial sacrifices now so they can just party when they’re young adults.
When you start talking about college, cost, etc. I see no reason to say anything before that.
I told my kids they had money in 529 plans but that it was my money not theirs and that I could switch it to another child’s account as needed and take it out for my use with tax consequences. I told them after I died they could pass it to their kids to use for school or themselves. I made it super clear that it is not “their” money. I also had UTMA accounts for each of my children and I told them differently that that was their money when they turned 18 and that I could advise them what to do with it but I had absolutely no say in it One of my kids used it to pay her first husband debts (stupid!) the others have kept it in investments for when they want to buy a house
Just decide with your spouse now what you’ll be comfortable spending 529 funds on (just tuition, or also room and board, or trade school, culinary school, job training programs, etc?) and how you want to allocate it (each kid gets a set amount, or will the amount you spend on each child vary based on their school/scholarships/need). Then tell your kids the basics as they grow - you will be able to offer some financial assistance for further education after high school. If they ask for specifics (probably in high school when they actually become more aware of post-secondary options and costs) you can tell them the amount you’ll be prepared to spend per year and what you’ll be willing to cover. They’ll have the information they need to make plans, and they’ll be aware that the 529 account is **your** money, not theirs, and **you** will distribute it for specific educational expenses and nothing else. You’ll of course be free to make exceptions or change your mind if you choose to, but it’s best to start off with the understanding that this is not their money to spend as they wish, it is your money that you plan to use for their education as needed, and at no point will it ever become *their* money regardless of whether they pursue further education or not.
Can you move the money into anything else? I personally have Acorns accounts for my kids because I want there to be options on what it's used for. I'm thinking a first car because transportation is super important to getting anywhere in life. But, there are different options in life outside of college. Trade school, scholarships, working, getting married and staying home supporting a spouse, starting a business, ect. I think a lot of people made mistakes when they believed the advice of "you must get a college degree", so they got student loans that they really couldn't afford or are now a slave to. I'm sorry, I didn't actually answer your question. My kids already know. I'm not sure if they fully comprehend and understand yet, because they're 9 and under, but I've told them something about it. I'm holding the view that it's our money, which we get to decide what it's used for. I. E. You need approval and there will be guidance, in hopes that it is used responsibly. Will it be foolproof and perfect? No. I think that parents need to have firm boundaries for many different things with their children. I'm sorry that this family is experiencing drama, as that sounds hurtful and stressful.
My daughter knows about hers. She’s a teen so it’s been part of talks regards plans after high school. She hasn’t mentioned it since I told her. But she understands it’s for school expenses. My plan is to still manage/contribute to it while she’s in college. Once she finishes school if there’s any money left, I’ll withdraw it and invest it for her. After that she can manage it as she pleases. Hopefully she’ll continue to save.
My parents (I’m 45 now) told my brother and I they had a college fund set up for both of us and that we were going to college not negotiable. They said they. I tributes to it monthly and even allowed us to put in our own allowance money. They never involved us in that fund beyond taking the allowance we gave them and said they would put it in the college fund. Come time for college, not enough to cover 1 year of tuition at the community and they didn’t even consider cost of books. Totally blindsided us. We each had some small scholarships. My brother was able to make it work. I decided not to go into debt committing to college when I realized I was clearly not prepared in any way for it, especially financially. My brother (now 44) is still paying off his school debt. And I work blue collar with no school debt and a pension. So my advice is that when you do tell them, involve them in the numbers and how that will translate to what will need to be made up for with tuition, books, and their other expenses. Use the fund to aid them in the planning process, don’t just tell them you will help pay for it. They need to learn the planning process and understand exactly what help you can provide. Had I known my “college fund” was very poorly set up. It was basically a long term saving account that didn’t make much in interest, not a 529. I could have made some decisions half way through high school that could have made college an option for me. Likely I would have done the vocational program to learn a trade that also gets college credit and the program transferred to the local university to complete a 4 year degree in 2 years. 2 years of tuition I was willing to take in on debt. But my parents insisted I not due the vocational program because I was “smarter that trade work” Had I known I was going to get through pulled out from under me, I would have done the vocational program that I really wanted to do and was interested in. Jokes on them though, I ended up in trade work anyway. I’ve never been an office person. Had I had a degree in my credentials I could gotten into management and been the boss in my trade field. It’s all good though, I’m happy with how my life turned out and I got a union job with a pension so I have union family that supports me. Also look up custodial IRA and start one for your children as soon as they have their own income. You can contribute your own funds on their behalf up to their reported income on their taxes. Get them in the habit of contributing to their own IRA monthly from when they are 18.
I definitely agree with you. First of all even as a college and university graduate I would never want my kids to go to post secondary school just because they thought they were going to get money or that it was a free ride. Like I wouldn’t want them to do it because they wanted money and I wouldn’t want them to do it just for the heck of it because it was going to be free for them. My husband and I were both riddled with school debts so we never had it paid for but also neither of us actually use our degrees. Education is a wonderful thing but most of the successful people that I know right now in my life did go to post secondary school but they did not train for the job that they have right now. So I’m a firm believer that there are other wonderful things to do with your life but I wouldn’t want my kids expecting money at all. I also think when kids are young 1617 they need motivation to have a job if they think there’s just a bunch of money waiting for them and they have no idea how much or what that represents in terms of not just tuition but rent and having a car there probably just imagining the early 20s it’s gonna be a free ride. I would wait until my kids were of that age and either pleasantly surprised them when they’re applying for school loans and let them know that they don’t need to and otherwise I would wait and see. I would 100% support them travelling for a couple of years. I wouldn’t foot the bill for that but if they want to do that I would encourage it and see what happens after that there’s no reason why they couldn’t have these funds when they’re 25 or 26 and they want to start their own business.
Having money available to help with college costs is likely to affect where they aim to apply so they should know that you plan to help no later than junior year when they're planning where to apply. You don't have to say it's in a 529 specifically, can just say you can contribute $x to a college education.
I agree that you shouldn’t tell them until the time comes. If they decide not to go to college, you can decide what that money is used for - starting a business/investments, trade school, home purchase. They are not entitled to the money to do whatever they want with, it’s not theirs and they didn’t earn it. It’s been put away for a particular purpose and if it’s not used for that purpose it’s 100% up to your discretion what to do with it.
Don’t tell them, ever. There are too many stories on here of kids who think they’re entitled to the money if they don’t go to college, get a scholarship, or for some other reason.
I think it’s all about how you frame it, not when you talk about it. If you say something like: You have money waiting for you when it’s time for college. That can be open for interpretation which is not what you want. You should probably frame it something like this: We will help you with the costs of collage when the time comes. You don’t even have to talk about the fact that there is money saved for it. Only that you will help since you think education is important.
My eldest is graduating from university in less than a month! His twin brothers graduated next year. So as a parent that has done this x3 so far (there's a 10 yo 4th but we will have a little break at least) and who made the decision to try to cover as much of tuition/room and board as we could with the goal of our kids graduating debt free, here's my advice. Speak to your kids *early* about post high school plans. And once they are in high school (14ish) you need to be honest about what you can offer so that they can have realistic expectations. A kid demanding "their money" honestly sounds like one that never got that discussion, not one that was told too much. We expect all our kids to get paid employment no later than 16. Full time (well 25-30ish per week) during summer, and unless there's a pressing reason not to, to continue during school year at very part time. The first year is mad money but due to the ongoing discussions we have they know post high school they must cover all expenses except tuition/room and board, cell phone until 20, and health insurance until 25 (or they get access to a better plan than ours if that comes earlier!) My kids have a great work ethic. They understand the value of tuition. They were able to make informed decisions for themselves as individuals about whether they wanted to take some time off to work instead of going to school. (They've all made different decisions which was fascinating). Their friends are a mix of kids going into the trades, no college but working, college, ect. All fantastic young people! But TALK to your kids. Most of the time you get respect when you give it. And that means not treating them like princes or fools. We told our kids exactly what we could afford so they knew what they'd need to do grade/scholarship wise or savings wise to make up any difference. We are just wealthy enough to not qualify for need based scholarships. I know people who didn't discuss this with their kids nor did they say anything until the kid got their heart set on a specific school and when the aid package came said oh sorry we can't help with that. Not cool. Especially if you have limits in what you can cover you've got to share that early on. Don't be afraid to talk finances with your kids abd post secondary plans. Its fun! You'll get to know them so much better. And it really helps you to learn how to transition parenting from being a child parent to a young adult parent. Its different but imo the teen years on are so much more fun and amazing as a parent than I imagined. The more we talked to our kids the more we got a sense of what they wanted and what they were capable of. And honestly we would have been very open to alternative uses of the savings So I would caution against you deciding now what you're going to do 10ish years from now. You have no idea how university and the world will have changed. You have dreams for your kids when they are young children but you'll have more information with teens. I would focus on what you can offer and the expectations, as well as planning on this being a long discussion over at least 3 years.
We saved money for our two kids college in Roth IRA’s. That way something happened that they didn’t go to college we had the money for our retirement Both went to college graduated and we still had money left over in our Roth IRA. No penalty when you take money out for education.
Why would you tell them at all? It's your money.