Your child is ten years old but has decided they want to be a doctor. You’re probably pleased with the prospects of having a doctor in the family. However, like most parents, you try to hide the panic as you consider how much a college education will cost eight to ten years in the future. Luckily, there are 529 college savings to help fight the rising cost of tuition.
529 college savings plans are available in and administered by each state. Often, they allow an investment firm or mutual fund company to manage the accounts. While the plans vary by state, they have some things in common.
The College Savings Plan Network, a national non-profit organization, works to make college education affordable for families, regardless of their income level. They list various 529 plans and allow you to compare them to find the best one for you. You may search for it on the internet by visiting their website.
One of the main advantages of using a 529 college savings plan is that they are federally and state tax-advantaged to encourage people to save for a college education. There are two primary forms: college savings plan and prepaid tuition program. Both plans allow you to save money free from federal income tax and possibly withdraw as federally tax-free if used for a qualified college or university in your state.
The 529 prepaid tuition program allows parents, grandparents, and anyone interested in helping pay for a child’s education to lock in future tuition at the current rate. The plan may be funded in a lump sum or monthly installments. The 529 college savings plan is an account paid on behalf of a child and is dependent upon the saving goals initially set. They receive a return based on a variable rate similar to a bond but may not receive as high an interest rate.
Your child is never too old or young to start a 529 account. Of course, the sooner you begin saving, the less you’ll have to pay out to reach a certain level. If you begin saving when your child is a baby, you may only have to invest $100 monthly to reach your desired savings. Whereas if you wait until your child is about to start high school, you’ll likely have to save nearly $600 a month to reach the same level.
Planning is wise regarding your child’s future educational goals. Use 529 college savings to help fight the rising costs of tuition. Starting an account sooner rather than later will not only benefit your child but could also benefit you.