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My daughter is 7 months old. Between my husband and my socking away a little something and some gifts when she was born, we have about 3000.00 to start her college fund with. I expect that we will be able to put about 2000.00 a year in the fund for her. I need some help deciding what to do with it. My parents have opened a small mutual fund for her with their broker, and are encouraging me to add to that. The fund performance is decent, but not any better than the market as reflected in an index fund. I am thinking of just getting an index fund for her. I am trying to avoid unnecessary taxes too. Our household income last year was about 140,000.00, but will be in the 90,000.00 range for the next 2-3 years because I am scaling back on myhours dramatically to be home with her.

Any ideas? Specific questions are: do I do this under UGMA or UTMA, what is the vehicle, and should I just put it in an index or SPYDR fund for the next few years and forget about it? How does the concept of Roth IRA's come into play for education? Also, what if (of course, I think I have the world's smartest baby!) she ends up with scholarships or financial aid, such that she does not need the money for college? How can my husband and I prevent that money from being used by her for a new car or something? If she doesn't need it, we intend to take it back! He and I put ourselves through school, and think it was a great way to go. I want to have enough to give her help, but not so much that she doesn't work hard herself. I would also love to minimize our tax burden.

Thanks, Liz
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