Some of us are early birds: We set up college savings accounts the minute a Grand is born. It's a gift of hope and trust in the future.
Then there are those who are really early risers: We start paying into a 529 college-saving plan as soon as we hear a baby is on the way. It's a gift to celebrate the coming event and a bridge to the future.
That's not all. There's an even more premature 529: the pre-grandparent account. A recent story in the Wall Street Journal took a look at starting a college-savings plan before the grandbaby has been conceived and conceivably before the recently wed couple are sure they want to have children. "If that seems like rushing" writes the WSJ, "think again."
Here are the numbers behind the idea: The cost of the average four-year college is nearing $165,000 and rising 3.7% a year. A 529 plan started with the maximum $14,000 initial gift, five years before a child is born, funded with $500 every month and earning interest at 3% compounded monthly, would yield $226,784 by the child’s 18th birthday. The same plan started at birth would yield $167,336.
When an infant arrives and receives his or her own Social Security number, the parents—or the grandparents who still own the account—can designate the newborn as the beneficiary. Ownership of the plan can be transferred to the grown children--the putative parents of the college student--should that be desirable or necessary. Or, if a future grandparent thinks he or she may not live to see a grandchild’s birth, a will can provide for an executor or trustee to carry out 529 plans using assets in a revocable trust.
And if there is no Grand baby? That's part of the chance you take.