The Maxwell House

I love seeing the differences in my two boys. One is more reserved, he clearly thinks through decisions before he acts. He prefers playing the computer to playing outside, and could spend the day just reading books.  The other, lovingly nicknamed Little Goat, has a bit of a stubborn streak and is resistant to discipline (as evidenced by the dozens of toys we have stuck down our heating vents). Little Goat loves playing outside and getting dirty, but he also enjoys a long snuggle. These little guys are very different, but my heart beats just as fervently for each of them.

I am sooooooooo thankful God has given me the priviledge of mommy-ing these two little souls!

I’ve long been wanting to do a “reality check” post. You know, bare my sinful soul for the readership (mom) in hopes of sharing the reality of life as the Maxwell House wife and mommy, and eradicating any possibility that I be somehow misinterpreted as a super-wife, super-mom, or super-blogger. However, when my sinful heart is laid across a page it just doesn’t seem to transfer to paper like it does in person. Via blog post, my testimony of God’s initial call to repentance and continual working can come off as too personal and sort of scary. Like finding a booger or a wad of chewed up gum under your chair at a restaurant, I think this post is best left untouched. So, I’ll save my testimony (past and continuing) for personal conversations that necessitate its conveyance. That being said, I am such a work in progress! I am continually surprised at how much work I still need to allow God to do in my character (see, the fact that I am surprised just shows how much PRIDE I still need to conquer). I am so thankful that he who began a good work in me will be faithful to complete it (Phil 1:6). Man, is he willing to take on a tough task or what? God, give me a passion to pursue you so that I will stop being a road block to you, but instead a well-swept path with no obstacles in the way of your moulding me into a bullhorn for your Glory!

The post below is from April of 2008. It’s interesting how much the economy has changed since I first wrote this look at saving for college. As is often the case, the below information came out of my own research when we were exploring savings vehicles for our own childrens’ educations. We have been able to stay on course with our own goal, but I understand that many families are experiencing a decrease in income (whether through job loss or other) and may need every drop of income, including their children’s PFDs. These folks need not feel guilty about not being able to invest monetarily right now. On the flip side, those who are able to spare a PFD or two for college savings can benefit from a weak stock market. A dollar saved today is worth it’s weight in gold tomorrow. <— I’d like to point out the ridiculousness of this statement. A dollar bill weighs very little. But you get what I mean 🙂 Continuing with the re-post:

I’ve been having a lot of fun (yes, really) the last couple of years researching college savings plans and investment tools. I’m sharing what I’ve learned for two reasons (1) I want to be able to look back and recall this info and here it’s convenient, and (2) many parents put off this decision until their kids are already in school, and by then they’ve missed out on several years of a growing investment. So, given that a parent decides to begin saving for their kiddo’s college (or future), where do they start? Here are the options:

1) A 529 savings plan

Benefits: this type of investment grows tax-free (contributions to the account aren’t deducted from your federal taxes, but distributions to pay for school aren’t taxed – yay). Also, the beneficiary can be changed. This is handy if one child decides not to attend college, the money can be used for another child (ouch). Or, the money may be rolled over into an IRA when the child reaches a certain age (not positive on this one, I just remember reading it somewhere). One benefit that many parents find attractive about a 529 is that the account remains under the control of the parent, not the beneficiary. So, if Johnny goes nuts and wants to spend his college savings at the University of Underwater Basket Weaving, mom and dad have the power to keep his hands off the investment. Many 529 plans also offer a “prepaid tuition” option, where contributions to the account go toward purchasing credits to be used in the future (but purchased at the current tuition price). With the increasing cost of tuition, this is an attractive account (although prepaid plans generally grow at a slower rate than their regular 529 counterparts).

2) Coverdell ESA

Benefits: Earnings grow tax-free. The biggest advantage that I see from this account is that withdrawals can be used toward not only college expenses, but qualified k-12 expenses as well. This puts a Coverdell ESA as a good option for parents who are planning to put their kids in a private K-12 school. If you’re going to pay for the schooling costs anyway, why not get some benefit out of it by pulling it out of a Coverdell Account? Contributions to the account are limited to $2000 per year. The account can also be transferred to a different child.

3) UGMA/UTMA (custodial account)

The investment options here are endless, as a UGMA/UTMA is basically just a mutual fund (or portfolio of funds) that is opened in a child’s name. The scariest thing about this type of account for many parents is that a new beneficiary can’t be named on the account, and once the child reaches the age of majority (usually 18 or 21), the money is theirs to do with as they please. The greatest benefit of this type of account is that the money is not restricted to college costs. It can be used for anything (gambling on the stock market, down payment on a house, mail-order bride). Because of this flexibility, the tax benefits are not as great as that of the 529, but it still offers some benefit over just opening a portfolio in the parent’s name. The first $900 of unearned income (interest) is tax-exempt, the next $900 of unearned income is taxed at the child’s rate, and the rest is taxed at the parent’s rate.

4) IRA

I’ve read a lot of conflicting advice about using this tool for college purposes. If you’re interested, do the research. Some people like this option, but I’ve run out of research time, so you’ll have to do your own 🙂

Things to consider when choosing a plan:

• Is it important that I be able to change the beneficiary? (If yes, then don’t choose a UGMA/UTMA)
• Am I comfortable with my child using the investment as they wish after reaching the age of majority? (If No, then a UGMA/UTMA is out)
• Do I want to use this investment for any k-12 expenses? (If so, consider a Coverdell)
• Do I want my child to be able to use this investment for more than just college? (If yes, consider a UGMA/UTMA)
• Do I want my child to be eligible for Federal Financial Aid? (If yes, then research these considerations, some investments count as the parent’s asset, and some the child’s)

For the next post I’ll present the Maxwell Family college savings plan, for your reading pleasure…

I did it. This morning I was out with the kids running errands, and we finished up around lunch time. I could have made it home for a hasty lunch, but I decided to be wild and crazy. I went through the drive thru by myself! No husband, just a hungry momma craving some fries (which I later regretted) and a couple of bored kids. Ahh, the power, the freedom of buying fast food for no reason. I don’t think I’ll repeat the experience but once a year; it was just a little too zany for this cave-girl.

The lack of posts recently are due to Kevin being gone for a few days at an awesome conference.  Some upcoming posts I’m working on: Janeen’s gardening adventures, post #4 of Emergency Preparedness, and college savings revisited.

Note: This photo was taken from the fascinating EnglishRussia blog. Their tagline? “Because something cool happens daily on 1/6 of the Earth’s surface”