May 29th is our favorite holiday. Yes, you read that right. 529 Day is a day to raise awareness about how important it is to save money for college! With tuition and expenses on the rise – some estimates putting it at $94K (public university) and $323K (private college or university) in 18 years* – having some money set aside for that future expense is essential.
What is a 529?
A 529 plan is an account that allows you to save for future education expenses. Just like IRAs and 401(k)/403(b) plans help workers save for retirement, 529 plans were designed to help families save for college. The accounts are administered at the state level, and are managed by a financial services company that handles all the paperwork and oversees the investments. TIAA-CREF Tuition Financing, Inc. is the program manager for 10 state plans.
Families can choose to invest in plans outside of their home state. However, there may be tax incentives for using your state’s official plan. In Wisconsin, Edvest is the state’s official 529 plan partner.
How the plans work
College savings accounts can be opened for children by parents, grandparents, aunts and uncles – even family friends. Edvest requires a minimum opening balance of $25 and is one of the 15 lowest-cost 529 plans in the country according to SavingForCollege.com with no annual maintenance fees, no sales charges nor commissions.**
Because any earnings the funds make are not taxed as long as they are withdrawn for higher education expenses, savings have an opportunity to grow with the child. Many plans, including Edvest, offer flexibility in how the savings get used. For example, Edvest funds may be used to cover the cost of tuition, room and board, books, or other qualified expenses. Plus, money saved through Edvest can be used at a variety of schools nationwide including:
- Technical College
- 2-year programs
- Graduate school
What’s more, if the child you’ve been saving for chooses not to go to college, the funds may be transferred to another eligible family member.
Saving is more important than ever
As trendspotters predict rising tuition costs, knowing there are programs to help families save can be empowering. (Try our free tuition savings calculator to estimate the impact of your savings.)
You may not save the entire cost of your child’s college expenses, but anything you can put toward it will reduce the amount your child may need to borrow. That means your child will graduate with less debt, and will be more likely to start post-college life on solid financial ground.
The earlier you start saving, the more money your child will have for his or her expenses. Why not celebrate 529 day by opening or contributing to a 529 college savings plan for your child right now? (We think that sounds like a great idea!)
*Source: Savingforcollege.com, The Real Cost of Higher Education, May, 7, 2015. Based on average tuition and fees for 2014-2015 as reported by The College Board® and assumed to increase 5% annually.
**Source: SavingForCollege.com, The Top 15 Lowest-Cost 529 Plans, April 29, 2015.