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investing for school?
Old 04-30-2015, 06:14 PM   #1
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investing for school?

hi everyone,

sorry if a related question has been asked

I need to figure out how to invest money for my kid's private school. I need to pay 22K for 6 years, starting 1 year from now (I just made the first payment). I have the money - some in cash and some in various mutual funds (like vanguard index total stock and total bond, etc) - but I would like to set it aside for school so it is untouched and not mixed in with other savings. CD rates are dismal. any ideas?

Thanks!!!
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Old 04-30-2015, 06:46 PM   #2
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Quote:
Originally Posted by norisk View Post
hi everyone,

sorry if a related question has been asked

I need to figure out how to invest money for my kid's private school. I need to pay 22K for 6 years, starting 1 year from now (I just made the first payment). I have the money - some in cash and some in various mutual funds (like vanguard index total stock and total bond, etc) - but I would like to set it aside for school so it is untouched and not mixed in with other savings. CD rates are dismal. any ideas?

Thanks!!!

CD rates are dismal, but still the safest place for something like that. Check Synchrony Bank. They have some of the better rates available.
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Old 04-30-2015, 06:54 PM   #3
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hi everyone,

sorry if a related question has been asked

I need to figure out how to invest money for my kid's private school. I need to pay 22K for 6 years, starting 1 year from now (I just made the first payment).
Well that is not investing You need money now or few years from now.

I would think CDs are place for such money.

If your kid was 1 year old that would be investing money. Since in such case you will need money in 17 years and there something simple like 50% VTI 50% VXUS would do just fine.
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Old 04-30-2015, 10:42 PM   #4
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CD rates are dismal, but still the safest place for something like that. Check Synchrony Bank. They have some of the better rates available.
+1, There is another possibility with CD's. But you have to be careful
and diligent, and the added return may not be worth the effort.

Take out 5 yr CD, has higher interest rate, And calculate, if you break
the CD early, will you have earned more interest, than leaving the
money in a saving account. (ie 1% Synchrony bank).
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Old 04-30-2015, 10:57 PM   #5
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529 plans are a good way to save money for education. You get tax deduction for college savings (reduces your taxable income) and there are several investment options available as well. Please check it out. Good Luck
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investing for school?
Old 05-01-2015, 02:53 AM   #6
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investing for school?

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Originally Posted by Rickt View Post
529 plans are a good way to save money for education. You get tax deduction for college savings (reduces your taxable income) and there are several investment options available as well. Please check it out. Good Luck

Not sure the 529 would work here. It only applies to higher education costs. Plus, although some states may have a deduction for 529 contributions, Fed does not.

http://www.savingforcollege.com

Above is the authoritative website on 529 plans if you want more info.


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investing for school?
Old 05-01-2015, 06:15 AM   #7
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investing for school?

A key point is that you have regular and periodic payments starting now for next 6 years.

We are in somewhat similar happenstance with my older son who goes off to university in the fall. Thought about this a lot. Safety vs returns.

I have a very conservative asset allocation of his school savings in about 50 percent cash and 50 percent equities heading into year 1 of school.

The cash will be used to pay years 1 and then for 2.

The equities portion will remain invested. If the market is up at end of year 1 and/or 2 it will evaluated and likely sold and used to pay for years 3 and 4.

But If down, we will cash flow from our own funds for year 3 and possibly year 4 holding "his" equities for a longer duration until they recover to "pay us back" for years 3 and 4 should the market fall and remain down for several years which is always possible.

Also If he decides to pause school for a semester for what ever reason etc this plan balances risk and hopefully will ensure at least a portion of his money stays up with inflation (college education inflation is some of the highest categorically ) as this protection is important over 4-5 years. It's hard to predict what young people will do over 5 years at this stage of their lives. Suspect in your case middle and high school is a bit more certain.

The other option was to stick the money in CDs or a mattress but I really won't need that third and fourth traunch of money for 36 to 48 months from now so want to keep a portion of it invested.
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Old 05-01-2015, 06:53 AM   #8
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One option is Colorado's Stable Value Plan 529 option, currently paying around 3%.
https://www.collegeinvest.org/our-sa...ble-value-plus

Whatever strategy you choose, be careful of the special once-every-twelve months rollover rules for 529 plans.
How And When To Switch Your 529 Plan
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Old 05-02-2015, 06:11 AM   #9
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I need to figure out how to invest money for my kid's private school. I need to pay 22K for 6 years, starting 1 year from now.
Have you ever considered how much that money would grow and compound if you instead sent him/her to a public school and then invested that money in a regular bond/stock portfolio?
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Old 05-02-2015, 10:59 AM   #10
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Sorry that you've not given enough information about your child's education. Are you wanting to save for a 1 year old's private primary/secondary education? Or are you wanting to save for a private college?

It's very hard to make such a decision about funding future schooling. Some children will not be motivated students 10 years from now. Some kids are just not as smart as others. Some students develop interests in technical trades and will not need a private school.

The 529's are hard to beat for long term savings for college, and you can invest tax free.

I just feel sorry for families living in some large cities where terrible public schools are the norm. My sister's providing private school educations for 4 grandchildren from 10 years old to 17 years old. The best high schools' tuition is pushing $20K, and prices go up yearly. By the time those kids get out of high school, she could have spent $750,000 (after income taxes). That's money she could have used to retire early--which she cannot afford at this time.

When I went to college, we just paid the tuition. The current 40 somethings borrow money for their childrens' educations--a no no in my book.

And my hat's off to you for wanting to get started saving early. All I say is save all you can, and avoid any borrowing for education. And 529's are the best way to save.
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Old 05-02-2015, 04:55 PM   #11
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We just cash-flowed DS's private school and saved in 529's for college.


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