What do I consider to be the best gift I’ve ever been given? The gift of college, fully paid by my parents (well I did have a small scholarship). Especially in today’s world I am incredibly grateful to have been able to go to the university of my choice, focus on my classes without needing to work during the school year, and get a college degree without having a loan to pay off afterwards. This is a gift that I really, really, really want to be able to pass on to my children as well. My parents did this using savings in bank accounts and CDs. We’re going to add another investment option to our arsenal: a 529 plan. Years ago when I first heard about 529 plans I didn’t think they were that great because I thought it meant you were picking the state where your kids would have to go to school. Having been given the choice to go anywhere in the country, except for schools located in-state or near home, I couldn’t imagine setting that kind of limitation for my kids. But when I realized that the invested money can be used for qualifying education expenses anywhere, I changed my tune.
To be honest, we’re not fully taking advantage of all the potential benefits of a 529 plan. Really the only benefits we’re taking advantage of are the tax-exempt nature of the distributions and the hopefully higher rate of return than a simple savings account or CD. Depending on the state there are other benefits available (I think typically only to residents) like tax deductions. This will seem kind of random, however, but we’re not enrolling in the California 529 plan, or the New Mexico 529 plan. We’ve enrolled in the DC 529 plan. It’s because SRI (socially responsible investing) is very important to me, and the DC plan is the only one (as far as I know) that is managed by an investment firm dedicated to SRI, Calvert. My Roth IRA is through Calvert and I really like the work that they do. TIAA-CREF, the plan manager for California ScholarShare, has some SRI funds but I don’t know that those funds would be part of the 529 plan. I don’t know if Oppenheimer, the plan manager for The Education Plan (NM) has SRI funds. By investing through the plan managed by Calvert I can rest assured that all of the funds in the plan are SRI funds. And I know that I am comfortable with the positive and negative screens that the company uses, and with the shareholder activism in which they engage.
Now we just have to manage to put enough money into savings in the next 18 years to be able to pay for whatever college will cost in 2030.