Helping you save for your child’s education is one of our core planning services. It’s encouraging when parents come to us and want to start their first 529 plan, but confusion often arises if a second or third child comes into the picture. 

Should we continue making contributions to our current 529 plan and divide the savings among all the kids? Or should we have a unique 529 for each kid and make separate contributions?

This is one of the most common questions I receive—and for good reason. The simplicity of maintaining a single 529 sounds like a decent option, but take a closer look and you’ll see having a separate 529 plan for each of your children is almost always more beneficial in the long run.

Let’s explore why.

Customized Investment Options

With one 529 plan, you’re confined to a single investment strategy for multiple kids. However, opening a 529 plan for each child enables you to fine-tune your asset mix to fit their individual needs.

For example: When saving for college, a 16-year-old might typically have a more conservative allocation than his three-year-old brother as funds are to be used sooner.

More Paperwork Down the Road

When you open a 529 account, you can only name one beneficiary. So what happens when you have two kids?

Let’s say your kids are two years apart. Typically, you’d tap into your 529 account when your eldest child heads off to college. But once the younger child starts college two years later, you’d have to change the name of the beneficiary…and back again if you want to allocate funds to your older child.

Bottom line: This name-changing can turn into a logistical nightmare. Separate 529 plans alleviate the headache and the extra paperwork.

Tax Advantages

Contributions to a 529 account that exceed $15,000 per year (or $30,000 for couples “sharing” gifts) won’t count against your lifetime exclusion and must be reported on a gift tax return. However, you can double your potential annual limit by opening a 529 account for each individual child.

Another advantage, depending on your state of legal residence, is that some plans offer state tax deductions for 529 contributions. Accordingly, multiple 529 plans may compound these tax advantages. We recommend that you consult a tax professional in order to maximize the benefit.

Final Thoughts

I get it: doing a cost-benefit analysis of 529 plans isn’t the most exciting way to spend a Saturday afternoon. Optimizing 529 plan structure is crucial for maximizing the value of your contributions—and setting your children up for success. 

If you have any questions about 529 plans or other planning ideas, just drop me a line.

There are about 100 days left in 2019.

Pools are closing. Store clerks are stocking Halloween candy along their aisles. As the amount of daylight dwindles, so too does the time we have to accomplish the goals we set for 2019.

Can you guess when there is a peak in goal setting? You got it — January. That’s when New Year’s resolutions are hot and people are brimming with confidence about the “new them” they plan to build. But the reality is that some studies suggest only 8% of Americans actualize their New Year’s resolutions.

Disappointing? Yes. Hopeless? Not at all.

Whether you want to lose weight, build wealth, read more, or watch less TV, it’s not too late to get back on track. As we head down the home stretch of 2019, I want to share three simple ideas that can reignite the energy you had during the beginning of the year and put the odds of achieving your goal in your favor.

1. Define Your “Why” 

It’s incredibly difficult to justify the hard work required to achieve goals without an underlying purpose. Simply saying “I want to do X” will almost always fizzle out after a few weeks. 

Instead, tell yourself, I need to do this for/because [insert person or cause]. This will carry you through the pits and valleys along the way.

If you want a deeper dive into the importance of defining your “why,” Simon Sinek’s book Start With Why is a must-read. You can also check out his wildly popular TED Talk.

2. Bombard Yourself With Reminders

Post-It notes might be obsolete, but they’re one of the most useful tools to keep you focused on your goals. Write your goals on them and stick them on your bathroom mirror. Every morning when you brush your teeth, stare at them and think about what steps you can take that day to accomplish them. 

Of course, this isn’t the only way to keep your goals top of mind. You can change your phone’s screensaver, set a daily reminder on your phone, or even download an app like Habitica. The options are endless, but your time isn’t.

3. Make a Bet.

Let’s say you want to lose ten pounds by the end of the year. Find someone who will hold you accountable and say, “If I don’t lose ten pounds by December 31, I owe you $500 (or whatever amount you choose.) 

Economist Dean Karlan found that the success rate of goal achievement with nothing at stake is a mere 33.5%. However, when someone puts money on the line, that success rate jumps to 72.8%.

100 days. 2,400 hours. That’s more than enough time to make a dent in whatever goal you have (or had) your eyes set on. Now, get to work. We’ll check back with you in December.

There is a new term we are hyper-focused on this month at Hill Investment Group – “snowplow parent.” The phrase refers to a parent who clears every obstacle out of their child’s way, preventing the youngster from developing the skills they will need later in life.

In episode 7 of the Take the Long View with Matt Hall podcast, experienced wealth counselor and financial therapist, Marilyn Wechter says “If you think about spoiled, what you’re talking about is kids who haven’t had the opportunity to figure out how to solve problems on their own and haven’t had the opportunity to figure out how to get something that they really want other than passively being given to.”

Marilyn and Matt Hall discussed the 4 primary things spoiled kids have in common.

1. Few chores or responsibilities
2. Not many rules to govern behavior or schedules
3. Parents and others lavish them with time and assistance
4. A plethora of material possessions

So, if we know what not to do, what’s the solution? Marilyn suggests we should nurture curiosity, patience, thrift, generosity, perseverance, modesty, and perspective.

That’s a lot to tackle, especially because today you can buy just about anything from your phone and POOF, it shows up at your door the next day.  How do you teach kids the value of money when your kids rarely see you hand a physical dollar to a live human in exchange for a good or service? Are the days of stashing wrinkled dollars and loose change in a piggy bank over?

In our house, once you turn 8, which is the age of my oldest son Jack, you began to earn an allowance on a weekly basis. It has been interesting to see how Jack chooses to spend or save his allowance. At first, he bought a few Pokémon cards on Amazon with our help.  In an effort to get him to realize everything does not come in a cardboard box a few days after you order it online, we went to a physical store.  We chose to visit one of his favorite spots, the store where everything is a dollar – I mean everything!  Jack chose his items and when he had to hand over his 4 hard-earned dollars to the cashier in exchange for a few cheap toys, he began to learn the value of money.  Shortly after that trip to The Dollar Store and some careful thought, Jack realized that the toys he bought would likely break or become less interesting within just a few days, so he’s now committed to saving his allowance.  He is learning if he puts his money in a bank, the bank actually pays HIM (very, very little these days) to keep his cash with them. That concept was mind-blowing for an 8-year-old. He asks me each week how much money he has in the bank and is thrilled to watch it grow. I can’t wait to show him the power of investing and the valuable work we do at Hill Investment Group!

Talking how to take the long view (not snowplowing) is vital at an early age, but as we hear in the podcast, it is never too late to start!