Savings account with College Savings on or off budget?
I haven't done this yet, but I have an old account at my credit union that offers between 4-7% interest per annum (you don't really know until their AGM). Now, it's currently inactive and I never really saved in it because it was really out of my way to get there and if I needed to get money from it I had to wait in a line for 30-60 mins which is my whole lunch break. But now that all my other accounts are down to 2.75-3.75% and I need to start saving for my kid's college (he start in about 2.5 years), I am planning to reactive it and start saving this money there and maybe my emergency fund. They have online banking now to transfer money to an ATM card for emergencies and my employer offers transfers from my salary to this credit union. I don't plan to be withdrawing from it until 2.5 years from now but I wonder, should I put this as on or off budget? What do you think?
Hi kayjenx !
We suggest including your savings accounts as on budget accounts so you can budget those funds too! This would allow you to budget the funds in that savings account towards a "Kid's College" category, or something similar! Here's an article that talks about how it works and you can take a look at this 7-minute Whiteboard Wednesday about savings as well!
The nice thing about that is you'll be able to attach Goals to those categories, and that will focus your savings even more. (How much did you want to have saved for tuition in that 2.5 year time frame?)
If you have the time, attend our free workshop about savings called Reach your Savings Goals and let us know if you still have questions!
Thank's for the reply. I was thinking about that too, the goals and because I would like to have other "categories" saved for in the account too. I need to save about $40K between now and the last semester of college. I am estimating like $5K per semester. The more money I can save before college starts the better but I am still paying off debt for the next year and a half so for that time will probably not save as much as I would really like to.
Normally I would agree with Faness in regards to savings accounts. And it makes sense for this use case.
However if it's long-term savings and for someone else...
I keep money that goes to my kids out of the budget once it enters a separate account. It gives it to them and is no longer available for dealing with Rule 3. They each have a savings account, brokerage account and Treasury Direct account that receive money from us every month. They are not included in our budget and not part of our net worth calculation. It's their money and this way it stays their money.