Start Saving Early For Your Child’s College Education With a 529 Plan

As adults, we all can agree that time flies. Days turn into months, which turn into years… and before you know it, your baby will be graduating high school and off to get his $20,000 a year education.

Nervous? The idea of paying for a child’s education can be intimidating, but it doesn’t need to be. If you start saving when they are young, you’ll have a much better chance of being able to pay for your child’s education.

The best place to start is with the 529 Plan. Contributions to 529 plans are not tax deductible, but they are also not taxed. So long as the money is used on education and related expenses, the government takes no money out. 529 plans have not done particularly well in the last few years, as most stocks, bonds and mutual funds took serious hits during the financial crisis. But if your child has a few years to go before reaching university age, they are one of the best plans to save in.

Speak with your financial advisor to set up a 529 in your name, indicating your child as the beneficiary. You can also set up a 529 if you are a grandparent looking to help your grandchildren with their education. 529s work incredibly well as a savings mechanism because the money is not counted against your child when applying for financial aid, as the account is in your name. If the account is in the grandparent’s name, even better – the money doesn’t exist in your immediate family when FAFSA goes over those aid applications.

529 plans don’t expire; if your child finishes his or her education without draining the account and can be given to a relative without taxes being paid, so long as the money still goes to education.

Leave a Reply

Your email address will not be published. Required fields are marked *