Question about savings-emergency/college

iVillage Member
Registered: 04-27-2005
Question about savings-emergency/college
7
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!!
iVillage Member
Registered: 03-22-2005
Mon, 08-22-2005 - 8:04pm
Do you put the college savings in a 529 plan or just a normal savings account? If they are just normal savings accounts, why not keep putting money in emergency fund AND college saving accounts, but decide ahead of time if there is a *super* emergency, you would allow yourself to dip into the college saving accounts (instead of putting it on credit cards), and promise yourself to replenish the accounts later.
iVillage Member
Registered: 02-19-2004
Mon, 08-22-2005 - 8:17pm
I would at least split the non-emergency savings between a 529 plan and a retirment plan.

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iVillage Member
Registered: 04-27-2005
Mon, 08-22-2005 - 8:43pm
It is in a Janus account.
iVillage Member
Registered: 04-27-2005
Mon, 08-22-2005 - 8:45pm
We currently both put money into 401K's at our jobs. It's not a ton of money but both amounts our company matches.
iVillage Member
Registered: 03-22-2005
Mon, 08-22-2005 - 9:21pm
Maybe drop the amount to $20 per child until you have the amount you need in the emergency fund?
iVillage Member
Registered: 04-27-2005
Tue, 08-23-2005 - 12:33pm
I might just do that. Thanks for your help!
iVillage Member
Registered: 07-11-2001
Tue, 08-23-2005 - 3:10pm

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 I always think a Roth IRA is a good idea as it has no tax taken out when withdrawn at 65, you pay the tax upfront.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)