As a parent, you want what’s best for your child.
Unfortunately, the cost of living coupled with inflation and tuition costs reaching astronomical limits, has made life and saving much more difficult.
Sure, you want your child to further their education and excel as much as possible, no matter he has to take help for his studies like, essay writing help or the other.
And for this, borrowing money isn’t always an option or ideal. So, how does one save for their child’s college tuition and expenses?
That question, among others, has become a hot topic in America this century due to the skyrocketing costs. Yet, you may be surprised to find out that you don’t necessarily have to be rich with copious amounts of cash to save and put your child through college. If you do it right.
The most practical and widely available saving program for all income brackets out there is the 529 program.
What Is The 529 Program?
The 529 program is a state sponsored investment plan into your child’s future made to help families like yours, save for your child or children’s education virtually tax free.
With the 529 plan, you have two options or accounts.
1. College Saving Plan:
This is the more popular and common option of the two, in which you would start investing in your child’s future by saving money into an account handled by an account manager. With this plan, you can withdraw any money for educational purposes and expenses without fees. These plans are tax free by federal income, and many states offer tax-free plans as well. You can use this plan any school or state.
2. Prepaid Plan:
This is a limited plan; only 12 states allow you to pre-pay all or a part of in state or public college education.
Why You Should Open A 529 Plan?
The average cost for one year at a four year not-for-Profit College is $43,921 or $175,000 for the four years according to CollegeBoard.org. That’s a staggering amount of money, and most people don’t have that kind of cash kicking around.
That said, saving once your child is born, can really make a difference for when the child is at a high-school student age. The 529 is the best way to keep the tuition cost rates current during a time of inflation.
Aside from the idea alone, the 529 is tax free. Some states, for example, Maine, don’t enforce any account fees either. In certain instances, you could benefit from tax deductions or incentives.
It’s best to check your state’s plan first, to see what types of options they may offer. In any rate, you can start a plan in any state and still go to school in your home state.
Another benefit is being allowed to add a second child, or a grandchild to the 529 plan. This is what makes the 529 the best college savings plan out there.
Start Saving at Your Child’s Birth
As noted, once your child is born, you should start investing if you plan on saving for their education period. Let’s say you invested $100 per month with a 7% return on your investment, by the time your child graduates high school, you would have amassed $43,000 in savings. Put it this way, the more you wait, the more you lose in savings, especially with inflation.
- Who runs the 529 program?
States or program managers manage the 529 plan. An institution like Fidelity or Merrill allow you to invest with them as they run your accounts with certain options like ETF’s, stocks, options, and more. It’s similar to an IRA.
- How much is it to withdraw the money?
You can withdraw the savings for educational purposes and expenses for free.
- What’s an ideal fee to pay to an institution for the 529 program?
Don’t pay a maintenance fee above 1 percent. There should be plenty of plans available underneath that. With the 529 being flexible, there’s really no reason to settle on high fees.
- What’s the minimum amount required to start a plan?
The minimum can be as low as $25.
The Verdict Is In
There are plenty of ways to save, but it’s not as easy as stuffing change and cash in a piggy bank or a savings account. With 529, an account manager can manage your account in a productive and meaningful way to maximize your child’s savings potential. By investing with stocks options and possible high returns, your monthly deposit could yield a higher return.
The risk is none and you don’t have to worry about being taxed on your savings or fees to withdraw your child’s savings. If you are looking to invest in your child’s college future, do it right, and start as early as possible with the 529 college savings plan.
- Joseph F Hurley CPA
- Publisher: Savingforcollege.com Publications
- Edition no. 12 (08/30/2018)
- Joseph F Hurley
- Publisher: Savingforcollege.com Publications
- Edition no. 11 (08/15/2015)
- Richard Feigenbaum, David Morton
- Publisher: Sphinx Publishing
- Paperback: 128 pages
Last update on 2018-11-20 / Affiliate links / Images from Amazon Product Advertising API