529 Plans versus Savings Accounts

by Mrs Money

Shortly after Penny was born, we opened her up a savings account. Any money she receives from birthdays, holidays, grandparents, etc, we stash in her savings account. She’s got a nice little nest egg that hopefully we’ll be able to help her grow over the years. Now that we finally got our IRAs opened with Vanguard and we’ve been really happy, I’m considering opening up a 529 plan for Penny with them.  I have some hesitations, and I definitely need to do more research but it’s something that probably would be a really good idea.

A 529 Plan would allow us to save money for her college education while receiving tax advantages.  The downside is if she decides not to go to college we’d be subject to income tax plus a 10% penalty.  Ouch.

One of the biggest concerns I have about opening a 529 plan is if Penny decides college is not for her and the money will be taxed and penalized.  Of course we would love for Penny to attend college and become something she would love, but if it’s not in the cards for her then I hate to lose the money.

A lot of states have programs where the money has to be used at an in-state school, and being that Mr. Money is from Colorado and I am from Michigan, you never know where we may end up.  We think about moving closer to family a lot, and I can’t guarantee that we will stay here when Penny is old enough to attend college.

It’s hard for me to commit to things so I think we’re going to just keep her money in a basic savings account for right now and maybe as it grows re-evaluate.  I don’t like taking risks with money generally, so this will probably be the best option for us right now.  I guess we will just wait and see how it goes.

How do you save money for your children if you have them?

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Paycheck Advance Vs a Credit Card Advance

by Mrs Money

Emergencies arise, and thankfully, if you no longer have an emergency savings account, there are other options. Paycheck advances and credit card advances are easy ways to access cash you need in a short amount of time. However, is one better than the other?

What Is a Paycheck Advance?

A paycheck advance is a loan against your next paycheck. A paycheck advance store will approve your loan up to your standard paycheck amount. The terms are to repay it in full on your next pay date. The money is automatically withdrawn from your checking account.

Advantages:

• Can be approved for up to the amount of your standard paycheck
• Great backup funding in case you’ve maxed out all alternatives
• No credit checks

Disadvantages:

• High interest fees
• Must be paid back by your next paycheck
• Can overdraw your checking account
• You can become dependent on paycheck advances

What Is a Credit Card Advance?

A credit card advance is accessing the available credit line of your credit cards. Instead of waiting for approval or the funds to be sent to you, you can access your money immediately via an ATM or a convenience check. You can handle life’s unexpected expenses that you can’t use your credit card for.

Advantages:

• Immediate access to the funds
• It can be paid back over extended time
• You have a pre-approved amount available

Disadvantages:

• Possible ATM fee if you do not use the associated banks ATM
• Standard transaction fee
• A higher APR than charges, sometimes up to 7% higher
• There are no grace periods, so you will have accrued interest the moment you withdraw
the funds

• A chance you can go over your credit limit and impose additional fees

Is One Better Than the Other?

As you can see, there tend to be more disadvantages with a credit card advance. However, if you are not living paycheck to paycheck, you may do better off with a credit card advance.

Paycheck advances are more difficult to get out of if you find yourself in the same situation the next go round. If you have defaulted to using them that means, you may not have had any emergency funds to turn to, such as your credit card.

There is a term called The Payday Loan Shuffle, which means those who take paycheck advances often take another to help cover the prior loan. You run the risk of closing your checking account and being in debt for a while.

You can eliminate accruing interest with a credit card advance. You can get a no-interest balance transfer offer or quickly minimize your interest by making larger payments.

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