The BEST Gift for a Three Year Old – College Savings!

Recently my friend’s daughter turned three and she was throwing her an “epic” birthday bash at a suburban kiddie party place. When she told me about the party, I thought what should I buy a three year old? I often struggle with buying gifts for kids because a – I don’t have kids and b – I don’t remember being that young. I always strive to give good gifts because secretly, I want to be known as the ‘auntie with good the gifts.’ I remembered my friend commenting that her daughter had so many toys, and would actually prefer cash but I thought, a check is so impersonal.

When I got the evite for the party however, I was pleasantly surprised. It had a link to donate directly to her daughter’s 529 College Savings Program Direct Plan through a company called UGift529.com. Now I would be able to give a meaningful gift! The website allows you to choose whatever denomination you like and leave a personalized note.

So what exactly is a 529 College Savings plan? 

A 529 plan is a “tax-advantaged investment vehicle in the United States designed to encourage saving for the future higher education expenses of a designated beneficiary.”

In layman’s terms, it is basically like a 401K or IRA for your child to be used for their college expenses. The contributions are not tax deductible but the money grows federal tax free and the money will not be taxed when you withdraw. You can set up your account and do payroll deductions, if your job offers it, or you can set up a plan on your own with an investment firm.

 What are qualified expenses for a 529 plan?

  • Tuition
  • Room & Board
  • Technology items – like computers, printers, etc. – but the child must be enrolled in college when the expenses occur
  • Books & Supplies

What are some NON qualified expenses for a 529 plan?

  • Student loan repayment
  • Transportation and travel
  • Cell phone plans
  • Health Insurance

As you all know, when you give a gift to a child, only a few things will happen, they’ll lose it, they break it or they hate it. Either way your money is gone and mommy and daddy are left to clean up the mess. Years ago, at a birthday party for my other friend’s twins, we adults sat around to see which gifts the kids would gravitate to. They ignored the gifts and proceeded to fight over a Poland spring water bottle cap, lol!

My gift is going to have a lasting impact on this little girl’s life. It’s going to gain interest and be worth far more than what I contributed when she turns 18. Her parents college payment load will be a little lighter and she’ll be able to take out less in loans.

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