Life event – birth of my second child
My second kid was born four years after the first one. I already had a decent chunk of money in my first kid’s 529 plan. When I wanted to save for my second kid’s college expenses, a natural question came to my mind – should I make monthly contributions for both kids into the same 529 account or keep separate accounts for each kid?
One 529 fund
With one 529 fund, you will keep things simple and uncomplicated by contributing to and monitoring just one college savings acct for all your kids. Less is more, right? One constraint with 529s is, at any given time, you can designate just one beneficiary to a 529 account. If your younger kid needs to use the money, then you will first have to change the beneficiary from the older to the younger kid so that he/she can use the money. This may be a bit inconvenient especially if the age gap between your kids is less and they need to tap into the funds around the same time in college. Even if the age gap is more and there’s not going to be an overlap of college years, it still makes sense to create separate accts as you will you see in the next section.
Multiple 529 accts
With multiple 529 accts, you will have a nice separation of concerns with each kid having his/her own separate account. Yes, there is an overhead of managing multiple accounts but in matters of money, I believe it’s better to have a segregation and spell things out rather than have a generic pool of money for multiple recipients.
Also, most 529 plans are age or target enrollment based and they become less aggressive (less stocks) as your kid approaches college age. If the age gap between your kids is at least 3 yrs, then its best to keep separate accts with separate target dates so that the next kid can benefit from higher returns (assuming good market conditions) because his/her target fund will be more aggressive than the older sibling’s fund.
What did I do?
I created a separate 529 acct for my second kid. I now have two Vanguard 529 Target Enrollment funds for each of my kids with an enrollment date four years apart. This gives my second kid’s portfolio a slightly more aggressive allocation which may help with more gains by the time he hits college.
Although the Vanguard 529 does not offer any tax benefits in my state PA, it is still a top class fund with great performance.
True that!
One of the best things that you can do for your kid’s future!
Yupp! Looking at the current student loan crisis, this is certainly one of the things you can assist with so that your kids are debt free or have little debt when they’re done with college.
I’m sure that my little kids will be proud of me when they grow up and realize how much I’ve saved for their education.
Vanguard has some of best funds out there with very low costs. Can’t go wrong with Vanguard.
Better to keep separate accts for each kid instead of mixing the funds.
I wish the deductions for Vanguard 529 were tax deductible in PA. Nevertheless, great funds from Vanguard.
Start contributing to a 529 account soon after your kid is born. You don’t want to lose out on the compounding gains.
Single or multiple accts, doesn’t matter. Make sure that you contribute to your child’s higher education.