This is one of those ideas that's so good that it's unlikely to ever become widespread like it should.
According (subscription required) to the Wall Street Journal, "Starting next year, children born (in Maine) will be eligible for a $500 grant that will be used to open and fund a Maine 529 savings account. The funds will be donated by the Harold Alfond Foundation, which coordinates charitable giving for the late Harold Alfond, the founder of Dexter Shoe Co."
What a great idea. By giving families the money at birth, it will have a full 17 or so years to compound before it's put to use. Assuming a rate of return of 7%, that money will grow to about $1579. By giving kids the money earlier, less money is required. In addition, the seed money for the 529 plan will likely spur many families to start saving for college themselves.
I wonder if someone like The Gates Foundation would explore trying a program like this on a national scale. It's a wonderful idea, and comparatively inexpensive. In Maine, it will cost between $7 and $9 million per year -- a small price to pay if it encourages more people to start saving for college sooner. By giving the money directly to families for their 529 plans, a lot of bureaucracy is avoided, and the money is allowed to be used for its intended purpose: education.
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