As promised, the Maxwell Family plan:
Here in Alaska we are so blessed to get a big chunk of change each October. That’s right, the Alaska Permanent Fund Dividend. The coolest thing about this dividend is that families receive one dividend per child. With regards to college savings, that means that each family has the opportunity to invest approximately the same amount for each child, without having to save extra each month. That is so appealing! It’s tough to put aside extra money each month, but transferring the dividend once a year is relatively painless. For this reason, we’ve chosen to begin by just investing each kid’s PFD. We’d love to add to this amount in the future, but until then we know that we’ll be able to at least put in $1,000 or more a year without ever noticing a drop in our bank account. Our current college savings plan:
  • A Fidelity UGMA/UTMA. The required opening balance is $2,500 on this account. We saved Jimmy’s 1st PFD and have set it aside to add to this year’s, and then open the account. Our plan after opening the account, is to invest $400 a year from Jimmy’s PFD into a portfolio of funds. According to my math, this would put us at just about the right amount to be able to turn the account over when he reaches 18 while having maximized the earnings without ever having the gains taxed at our rate. This number is going to of course vary, and I figure that we’ll have to reassess every couple years to make sure that we keep this course. We like that the child can use this for anything. If they’re diligent, get the UA Scholar’s 4 year grant, and work during the summers, this money can be used to help buy a house, or pay for missionary work, or whatever. We like that flexibility.
  • UA 529. We opened this account when Jimmy was born ($250 to start, not too bad) and haven’t stuck in any money since. The plan (after beginning the above custodial account) is to deposit the remainder of each year’s PFD into this account. We’re currently 100% invested into the ACT portfolio, which buys prepaid tuition at today’s rates. If the kiddo chooses not to attend UAA, the ACT portfolio still has a cash value that can be used at any school. If this money isn’t needed, it can be rolled over into an IRA (I believe) to give the child a head start on their retirement savings. 
Just investing each kid’s PFD isn’t going to pay for four years at a private college. But, it will give them a great head-start. It’s painless for us, and easier than paying for oodles of tuition later. I am so grateful today that my folks opened a UGMA/UTMA for me when we moved to Alaska. They also helped with college tuition, and I worked during the summers. I was able to use the money from the custodial account to help purchase the land that we later built our house on. I’m excited to give the same benefit to my kids, and can’t wait to see just how it all works out. That is, as long as the spending of the investment doesn’t involve paying tuition at the University of Underwater Basket Weaving or the purchase of a mail-order bride 😉
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