Question about savings-emergency/college
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Question about savings-emergency/college
| Mon, 08-22-2005 - 7:59pm |
From January to August we save $60/month in our "emergency savings". We also save $40/month for each child for college. From August to December (since I hit the $5,000 mark with the daycare and $50 more is taken out of my paycheck)we are unable to save at all.
When we ARE able to save, what is the best thing to do, keep saving for the kids education or put it all towards the emergency fund. I have always felt I should be saving for college, even though it is not alot, but it will help a little. I know once they get to college we will probably have to help with the payments per semester but I thought we should get a head start.
Thanks for listening!!
When we ARE able to save, what is the best thing to do, keep saving for the kids education or put it all towards the emergency fund. I have always felt I should be saving for college, even though it is not alot, but it will help a little. I know once they get to college we will probably have to help with the payments per semester but I thought we should get a head start.
Thanks for listening!!

Though you and your husband have company 401Ks it is always a good idea to have additional savings plans for retirement. I always think a Roth IRA is a good idea as it has no tax taken out when withdrawn at 65, you pay the tax upfront.
Also if you are saving for your kids college - I would find out about the 529 Plan - it gives tax breaks and the money does not need to be spent on tuition only. It can be used for accommodation and books as well. With putting your kids college money in a regular savings account you are putting in money that is already taxed and money that will be taxed come tax time. All regular savings accounts are subject to tax. It's really a lose-lose situation.
Here's a link on the 529 Plan I thought you would enjoy from CNN Money and why they are a good idea:
http://money.cnn.com/pf/college/features/529plan/
With asset allocation depending on your age, but if you are fairly young it should be:
80% Stocks - 15% Bonds - 5% cash (CD's/Money Markets) (that's an aggressive approach)
60% stocks - 30% Bonds - 10% cash (moderate approach)