The end of the school year is right around corner, and as a parent, reality is setting in that your child is fast approaching life as a college student – even if several years away.
College tuition can be very expensive and can be a significant financial burden on family finances. A good way to work around this issue is to use a College Savings Plan, also known as a 529 plan.
May 29th is College Savings Day (a.k.a. 529 day), and this is a great opportunity to review your plans for financing the next step for your child. Of course, the earlier you start saving, the better. However, it is never too late to get started, and many small contributions can add up to significant amounts over time. You can add small amounts for holidays, birthdays, etc., instead of adding yet another plush toy to the pile. It can also be a great idea to invite friends and family to help out, as adding to the college funds will be a gift for a lifetime.
College savings accounts can be started when your children are still babies, even when the diapers still take up a big chunk of the family budget. The younger they are when you start saving, the less money you have to put away each year to reach the goal.
A 529 College Savings Plan is a flexible savings vehicle. Some states offer tax benefits for contributions, some even provide a match to entice families to get started. The money in a 529 plan can be used to pay for college tuition, fees, books, supplies, different computers and equipment, and can include room and board as well. If the funds are used to pay for these qualified educational expenses, the account offers tax-free earnings growth and tax-free withdrawals.
If you have been able to build a solid college savings account, it will allow your child more options in choice of college. It may be that an out of state college offers better programs to match the academic interest, or that the dream school does not offer as much financial aid as you would have liked.
You can utilize the 529 plan of your choice, not just the one of your home state, although it can be beneficial to use the in-state plan as it may offer a tax benefit. When it is time to choose a school, you are not limited to the state where you choose to invest in your 529 plan, but you have the flexibility to choose almost any college across the country, or even many international schools.
College can be an important period in your child’s life. This is where they grow to adults and build a foundation for their future. When there is less financial stress, it is easier to embrace college as the great opportunity it is.
All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.