Instead of our usual scholarship listing, we thought this time of year would be a great reminder about the positive impact of having a 529 Plan. It is never too late to start saving (and getting contributions from others) for your college education.
529 Plans should be considered as one of the best gifts you can give — an investment in education! Giving a gift with a more long-term and substantial impact is better than anything you can fit under a tree.
529 plans are tax-advantaged investment plans for families planning for the financial burden of college. The College Savings Plans Network (CSPN), an objective source about Section 529 College Savings and Prepaid Tuition Plans, offers resources to help you make decisions about saving for college.
Here are more details from the CSPN about 529 Plans:
How it works: A 529 account may be opened by anyone and contributions can be made conveniently through payroll deduction or automatic transfers from a bank account with minimum contributions as low as $15. Relatives or family friends can all be account owners, or you can simply choose to contribute to an existing account. The Plans don’t charge a fee for the gift and you know that your gift will be deposited directly to your child’s account.
The benefits of 529 gifting: The biggest benefits are the tax-free advantages. All money grows federal and state income-tax free and all withdrawals used for qualified higher education expenses, such as tuition, books, supplies, and more are exempt from federal income tax.
Long term advantages: Even a small contribution can go a long way. Consider this: A family that begins setting aside $50 a month when their child is born can accumulate more than $21,000 (in an account that earns 7% interest per year) by the time that child turns 18.
Why it’s important: With college tuitions doubling over the past decade and student loan debt reaching 1 trillion dollars at the start of this year, there has never been a better time to save for college than now. Children with a college savings account are six times more likely to attend a four-year college compared to children with no dedicated college savings account.
Now that you know a bit more about these plans, consider asking your friends and family to contribute to a 529 Plan instead of that mall gift card. Fall of 2014 will be here before you know it — and every little bit helps!
> For more information about saving and paying for college, check out NextStepU.com.
