Every parent wants their child to have the best college opportunities, but funding that dream is often expensive. Getting started early with your child’s college fund can be a way to lighten the financial load, but choosing how to save that money can be tricky. There are several good options to help with saving up, but a 529 plan might be a good place to start. These are tax-advantaged plans that facilitate and encourage long-term saving for education. For 529’s, the plans are operated by institution or state funding, helping plan out and invest in particular educational financial needs.
The convenient thing about 529 plans is that they are offered, in some form or another, in every state. While the options and rules differ from state to state, there is always a financial option. 529’s come in two basic forms, a prepaid tuition plan or a college saving plan. As U.S. Securities and Exchange Commission outlines, prepaid tuition plans purchase credits at certain colleges for the current tuition rate , while college savings plans accrue money that can be used (generally) anywhere.
With the prices of colleges being what they are today, some schools are adopting a pay-later program that puts off the cost of school and collects it in small amounts after graduation. However, being in debt for decades after getting your degree is still a draw on your livelihood. Investigating plans that will have the financial burden taken care of from the get go can save you and your children dollars of pain later. The advantage of 529 plans is that the money grows and is tax advantaged, meaning that if you use your fund for educational expenses, you won’t have to pay taxes on it.
Not having Uncle Sam take a chunk out of your savings can really pay off, literally. School isn’t cheap, and if your child is hoping to go to an accredited school like the University of Illinois at Chicago, a thousand dollar cut from taxes could leave you high and dry, and your child can no longer pursue their dream in health informatics .
However you want to invest is up to you, but to make the future brighter and lighter, looking into a financial plan like a 529 as soon as possible will make the road not so bumpy, and will give your child more scholastic opportunities.
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