Being able to afford a child’s college education is a concern that nearly every parent has. There are many different types of college savings accounts, from educational savings accounts to custodial accounts, and more, and it can be difficult to navigate the pros and cons of all of them. Of all the options, one of the most common ways to save for a child’s college is through a 529§ plan.
A 529 plan is an investment plan that is specifically earmarked for education costs. It’s a great solution for many families because it has numerous benefits, namely that it’s tax free and low maintenance. Anyone is eligible to open a 529 plan, and they are typically very flexible, allowing you to switch the name of the beneficiary if you need to and more. Consider these three benefits of 529 college savings plans.
It’s Tax Free
One of the biggest benefits of a 529 plan is that you won’t pay any taxes on it, as long as you withdraw any money for qualifying expenses. Keep in mind that this plan is specifically for education expenses. And that includes room and board, school supplies, computers for school, and more. So, there are many different options when it comes to paying for your child’s complete college experience.
If your child gets a scholarship to cover the cost of tuition, you can withdraw up to the amount of their scholarship without penalty. Your only real risk when it comes to penalties is if you withdraw the money and don’t use it for educational expenses. The money in a 529 plan may not be used for anything else.
It’s Low Maintenance
Unlike some other investment opportunities, a 529 plan can be pretty hands off. If you lead a busy life and don’t want to worry about one more money task on your to do list, this can be a great option for you. It's important to note, though, that a 529 college savings plan is still an investment account that carries risk. If you want to manage your own risk, you can choose a 529 account that allows you to specify the investments you want. If you’re not comfortable choosing investment funds on your own, you can find a financial advisor* to help you manage it. Once you choose a plan and possibly an advisor that’s right for you, you shouldn’t have to worry about your investments too often. Just check in every quarter to make sure you’re on track.
To find a financial advisor or learn more, contact the CFS
* Investment team at UFCU at (800) 252-8311 x21081.
It’s Available to Everyone
The great thing about a 529 plan is that everyone is eligible for it, and you can invest in it without worrying about your child’s age. Keep in mind, though, that the closer you get to their college years, the more conservative your investments should be. In fact, when it comes to saving for college, the earlier you start, the better, although every little bit helps.
Do Your Research and Choose Wisely
Overall, a 529 plan is a great way to save for your child’s education. It allows you to put money away for their education while getting great tax benefits along the way. Just be sure to research 529 plans thoroughly before investing, as plans can differ from state to state. Whatever you choose, the ultimate benefit is that your child will have some portion of their college education paid for, which can greatly reduce what they might need to pay in student loans in the future.
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