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Happy 529 Day y’all!
Okay so this isn’t a Hallmark card or anything but does mark a special day so to speak. Financial outlets like Forbes are celebrating 529 Day to commemorate the 529 college savings plan and Save for Education Day.
For those who don’t know what a 529 plan is, it’s a pretty nifty investment outlet that allows for tax-advantaged savings (exempt from federal taxes) and the ability to grow your money in outlets like mutual funds. There are two types of plans available: college savings investment plans and prepaid tuition plans (typically state-run with limitations).
My husband and I created a 529 plan for our son last year, as soon as he got a Social Security number. Any college graduate can testify to how expensive higher education can be, and the thought of having to help pay down the road is a very scary reality. Shoot things are pricey right now. Can you imagine what the going rate of tuition will be in another 20 years?
Lord help us.
Signing up for a 529 college savings plan was effortless. Our provider only required a $25 opening amount and making an investment choice from an assortment of options. You might think this whole thing will fly over your head, but in reality, it’s pretty digestible — so long as you don’t rush through the information. As with our 401k plans, our son’s contributions will be invested into different portfolios that each hold a series of mutual funds with different targets. As he gets older they will switch from moderately aggressive to conservative. This is a course of action that works for us but there plenty of others. You just have to figure out your family goals and what works best for you.
I don’t think many people realize that 529 plans are available at their banking institution. You don’t have to go the fancy financial institution route unless you feel it’s necessary.
The reason I’m waving the 529 flag is because a new Edward Jones study reveals close to two-thirds of Americans still have no idea what one is. To make matters worse, 83 percent of us admit we can’t afford college, yet don’t take advantage of opportunities to invest and grow our money.
Sure wealthier folks are more likely to finance something as expensive as college, but that doesn’t mean the rest of us can’t get a leg up on the process — or at least put away here and there to have it accumulate. Here are some tips on ways to invest in your child’s financial future.
Get real about expected costs. Resources like SavingforCollege.com have calculators that can help you determine just how much your child will need to go to school. Even though these are estimates, it will give you a clearer picture of what to expect.
Start planning now. The “laws” of compound interest determine that more time for your money to grow at a certain rate can translate to extra dollars. Those who start to save for their child’s college sooner than later will have extra time to see their investments grow.
Put away what you can. Sure it would be awesome to set aside $1,000 a month for your child’s education, but that’s not very realistic for some people. Don’t let the bottom line cloud your decision to start now. Remember, many 529 college savings plan only require a small deposit. If you can put away $50 each month, please do so. Always do what you can, and work to pay down your debts so you have more available funds.
Treat savings like a bill, not an option. In addition to paying yourself first with your income, consider saving for your child as a monthly requirement and not an option. This mindset will help you to make necessary edits — like cutting back on eating out — in order to find the money in your budget to invest.
Shop online. One of the things I learned with 529 plans is how you can link most to Upromise.com, a website where proceeds from your shopping are added to your child’s account. Aside from hating shopping in person, this has allowed my son to receive hundreds of dollars in his account last year alone just for purchasing items through participating companies (there are tons). Who doesn’t enjoy getting money back?
To learn more about 529 college savings plans, check out these reads:
