Getting an inheritance is always bitter sweet. On one hand you’re getting a chunk of money for free for doing nothing at all, and on the other someone has to pass away in order for you to receive it. It’s very much bitter, with a tinge of sweet.
Then you have the times when it’s 99% sweet and only 1% bitter – like when you receive a call out of nowhere saying you’ll be receiving some money from someone who died well over 15 years ago – WOW! And to the tune of $3,200! It still stings of course when you’re reminded of that fateful event so long ago, but what a nice surprise to come after all these years :) As if it were on purpose to continuously bring joy to your loved ones’ lives.
[Note to self: When you distribute your own millions in 98 years, be sure to “forget” about some of it and have your future great-great-great-GREAT grandson hand deliver the checks to all family members years after you pass. Or better yet, divide it by 50 years and have that great-great-great-great grandson send the checks every year for half a century and REALLY make your family happy! That way the slackers can’t spend it all at once too ;)]
Anywho, I’m not quite sure what the reasoning was behind this new money we’ve now received (it was from a family member on my wife’s side), but regardless we were given $3,200 to do with as we please, so long as “what we please” equals “giving to our kids.” So really, it’s for Baby Penny and Nickel.
And what do you do with a kid’s inheritance?
Well, you could:
- Buy them tons of candy
- Buy them gobs of fancy toys (iPotty anyone?)
- Put the money into their savings
- Put the money towards their future college degrees
We went with the college degrees. Specifically, their 529 college savings accounts through Virginia529 – our state’s plan so we get double bang for our buck: tax-free growth AND a write-off for investing in the first place! Up to $4,000 per account, and per YEAR. A perfect way to extend those happy little dollars if I do say so myself. (We went with the inVEST option btw, not prePAID)
Once we settled on where this money was going, the next question became – How much do we give each kid? Do we split it up evenly so it’s technically fair, or do we make sure both kids have the same amount invested in their accounts since one has a whole lot more than the other being a year older in the game? How much lopsidedness is appropriate?
I’m still not entirely sure what the right answer is, but what we ended up going with was the “let’s get the two accounts as close together as we can” route. Mainly, because one had $4,500 in their account and the other $0.00. Just didn’t seem right to give each $1,600 when we’re no longer in the position to contribute to *either* account on a monthly basis anymore :(
When Baby Penny was born the income was rolling in and we were able to divert a cool $4 grand to it. With money being tight now, however, we haven’t thrown a dime into Baby Nickel’s 529 (or had opened one up, for that matter) leaving him with a big fat goose egg to stare at.
So in went a whopping $3,200 into Baby #2’s account which leaves us more balanced now:
- Baby Penny’s 529: $4,504.29
- Baby Nickel’s 529: $3,065.83
(The market’s depleted a little of each since making the investments. But of course we don’t worry about that because we have 17+ years a head of us for this $$ to grow and grow and grow!)
Perhaps it should be $6,104.29 to kid #1 and $1,465.83 to kid #2, but regardless we did what we thought made the most sense and if ever questioned by them I’ll whip out the forever mighty – “Because I’m the dad, that’s why.” I cannot WAIT to finally be able to say that after all the years of hearing it myself, haha… what a genius line! ;)
Where this $3,200 was invested INTO...
Here’s the other beautiful part to the story: Virgina529 has Vanguard funds as an option to invest in! Rock on! Which means we can really not have to worry about growing this money over time as it’ll be indexed and clear of ridiculous fees all over the place, ugh… And not only that, but they have the one fund I was debating on throwing all my retirement money into too!
- VASGX – Vanguard LifeStrategy Growth Fund
It was a bit more conservative than my VTSAX I ended up going with (Vanguard Total Stock Market Index), but next on the list of “wants.” So now my kids get them which is a lot more appropriate in my eyes for what it’s going for – safer growth over time. It’s still nice and aggressive (and categorized as so in the plan), just not as aggressive which I’m perfectly fine with. So I thought that was pretty cool :)
(Btw, xfering 529 accounts from state to state is pretty easy these days – in case any of you have been putting it off. It literally took a phone call and dropping a simple form in the mail to move Penny’s from Maryland to VA.)
Here’s a refresher of what VASGX holds:
- 56.1% — (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares
- 24.0% — (VGTSX) Vanguard Total International Stock Index Fund Investor Shares
- 16.0% — (VTBIX) Vanguard Total Bond Market II Index Fund Investor Shares
- 3.9% — (VTIBX) Vanguard Total International Bond Index Fund
So 80% stocks and 20% bonds vs. 100% stocks like my sexy VTSAX.
Anyways, that’s what’s been going on over here lately… I’ve hinted it may be coming over the months of net worth updates, and fortunately it proved accurate. Didn’t want to get my hopes up until I saw the $$ hit our account, if you know what I’m saying… Again, crap way to receive it but much better after so many years have gone by! And I’m serious about my own wealth down the road…. Totally gonna surprise the hell out of my loved ones when I’m gone ;)
I’ll leave you with one other nugget to marinate on…
Do you/would you include college savings into your net worth?
Since you’re technically the owner of it and can disperse the money to whom you see fit, even yourself? Or do you separate it out since it’s money that’s “owed” to someone else at a future point in time?
Originally I kept it out of our net worth myself, but then I realized the kids may never use it if they have their mom’s smarty pants genes and all get scholarships, so I added it in since we could always end up keeping it in the end (along with a hefty tax bill, of course).
The more I think about it these days, however – especially with the “wishes” of this new inheritance addition – I’m confident we’ll just end up giving it to our kids regardless of the situation. After all, it’s set aside to be invested into their future, so whether that’s college or their first home or even first business, the point of this money is to help jump start their lives, right?
So I’m now thinking we need to take it back out again – though it pains me to not have money accounted for like that. I use my financial snapshot to show *where* all our money is at any given point in time, so I’ll just have to devise a section for the kids and account for it there. Though now that I think about it it’s not like we include their savings accounts in our worth, so why would their 529s be any different? Hmm… I think I’m having an epiphany here :)
But I digress… Point is, our kids inherited some money, daddy’s using Vanguard funds to help grow it into the millions (since that’s what college will cost by then – hah!), and in 17 years we’ll give the gift of a fully paid for degree just like our parents did for us. Society may not believe in college like it used to, but we sure still do. And it would be a blessing to have our boys join the real world unsaddled by such massive debt like so many of our friends.
Now let the opinions fly! ;)
PS: Here’s a post I did on the pros and cons to 529 college savings accounts when we were first looking into them – in case you’re embarking in some high-quality baby making too!
[Photo cred: Sean MacEntee]