I changed my mind and opened college accounts for each of my three kids. Up to now, I’ve been thinking that I shouldn’t do that until I was already maximizing my contributions to every tax advantaged retirement account. The idea there is that people will always loan money for school, but no one will loan money for retirement.
I still think that is a very rational and reasonable stance. However, it misses one key point. Your relatives aren’t going to subsidize your retirement, but they probably will help with college. Naturally, they don’t want to just hand you the money either, they want it to go into a college savings account.
Solution, a "429 plan"
According to CollegeSavings.org:
Most Section 529 state college savings plans allow parents, grandparents, other relatives, and friends to contribute to a childâ€™s higher education fund.
This means that when my parents or other relatives ask what they should get the kids for Christmas or birthdays, I can tell them a trinket the child wants, and suggest the main gift be a contribution to their college fund. Very nice.
Only $25 a month
My state, Oregon, has a plan run by Oppenheimer. I think the fees are a little steep, but not nearly as bad as some states. The nice thing is that I could open the account with no deposit at all, and only a $25 per month per child auto-deposit. I may be saving the bulk of my money for retirement, but I can afford $75 to keep the account open for relatives to be able to contribute.