529 College Savings
Patricia Roberts is Chief Operating Officer at Gift of College, Inc., and author of Route 529: A Parents Guide to Saving for College. Patricia is on a mission to educate other parents about the value of planning ahead! One of the most substantial financial challenges parents will face is saving for their children’s education expenses. For that reason, opening a 529 college savings account before a child arrives or soon thereafter is something the family will appreciate for years to come. Patricia explain the benefits of 529 plans in this guest post.
There are many reasons to start saving early. Here are the primary ones:
529 College Savings – Financial Benefits
The power of compounding and great tax benefits. The earlier parents can open a college savings account for their child’s future, the more time there will be for even small contributions to compound and grow in value. Plus, the earnings on 529 accounts are not taxed! They are never taxed when withdrawn to pay for a wide range of higher education expenses, well beyond traditional college. Also, 35 states and the District of Columbia offer an annual tax deduction or credit for contributions to 529 college savings plan accounts.
It’s easy to get started. It takes very little time and money to get started. Most 529 accounts can be opened with $25 or even less in about 15 minutes. If a parent does not yet have their child’s social security number, they can open a 529 account and name themself as beneficiary. The beneficiary can then be changed to the child once a social security number is available.
Easy to Save
Friends and family can begin to contribute. Once a 529 college savings account is opened, parents can begin inviting others to contribute for upcoming celebrations. Rather than giving gifts that are quickly outgrown in size or usefulness, the gift is truly used. Most 529 plans have easy-to-use gifting tools which enable invitations to be sent by account owners. Creating a circle of support for a child’s education is a great tradition to begin. After all, between birth and college, friends and family will have 18 birthdays and at least 18 holidays when they may want to give a gift to the child. These amounts can add up.
Peace of Mind. New parents understandably have a lot on their minds and on their plates. Establishing a 529 account early in your child’s life for future education creates peace of mind. After all college may possibly be one of the most significant investments as a family. Any amount saved will be that much less that a child will need to borrow and repay with interest.
As a financial services professional and expert in preparing for post-secondary educational expenses, I have helped tens of thousands of parents avoid millions of dollars in student loan debt over the past 23 years. Visit me at GiftofCollege.com if I can help!
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