Ask Terry Questions Financial Planning for College, Money in Children’s savings acct?

Financial Planning for College, Money in Children’s savings acct?

By Terry Savage on August 20, 2014 | College Savings / Student Loans

All my kids have savings accounts, but as you know they earn nothing. I was thinking of closing the accounts and switching the money to a college 529 plan since they wouldn’t be allowed (by me an my husband) to touch the money until after high school graduation anyway. They all have plans to attend college as of right now so I believe the money will be well used. Any advice?


Terry Says:  I would definitely move the money to a 529 account — because money held in a child’s name in a custodial account  weights about 7 times more heavily against you in the financial aid formula!  I would just go to Vanguard or Fidelity and open a 529 account — maybe only one account, as the money can be used for any child in the family, at any college, in any state.

BUT, as I am writing this I am wondering about something else.  Is this a small amount of money that each child has saved, perhaps from summer jobs?  Or is this the way you have been setting money aside for their college over the years?  It’s important not to destroy the incentive that comes to children when they see the results of their own hard work piling up!  And if it isn’t too much money, they can spend it on a new computer, or other realistic purchases before the end of their junior year in high school — which is the timeframe for disclosing assets that will be required when you file the FAFSA form for college aid.

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