Saving for high school brother's college

Hi everyone,

I just graduated in this past spring, and now have a great software engineering job. I am lucky to have no student debt from a combination of the financial aid at school and my parent’s generosity. My brother is currently a sophomore in high school, and I want to help pay for his college in two and half years.

What advice do you have for opening a 529? How do I decide which 529 plan to pick? A few factors to consider:

  • It is later than others to start saving for college.
  • It is not unlikely that he attends an out-of-state or private school.
  • I live in California, where there are no tax deductions for contributing to a plan.
  • My parents reside in a state where up to $10,000 is deductible if they put it in a 529 plan.

If the money goes into a 529, and he doesn’t end up needing it for college, then it could be there for a very long time before a relative of yours (or you yourself) need it for educational purposes. Other savings vehicles might work better. We started saving very late for Happykid, and set up laddered 12 month CDs that could be cashed out or rolled over. Half were set for July (for fall expenses) and half were set for December (for spring semester expenses).

Just wanted to say that you’re an awesome older brother/sister!

It may be that saving through a 529 gives you no benefit but will restrict those funds to education unless you want to pay a penalty. Look at other savings vehicles. It won’t help you to put it in a 529 plan in your parents’ state since you don’t pay taxes in that state (I assume).

Are you maxing out your own 401k? What is your tax bracket?

As earning and asset from sibling does not count in financial aid calculation. You better keep the money under your name until it is needed.