It happens in a blink; you find out you are expecting, and then you are deep in thought about college and how you will afford it. The years pass so fast that the expense of college will sneak up on you. It is like you blink and they go from babies to brilliant young people with the future before them.
This post has been sponsored by Country Financial, but the opinions and thoughts are my own.
What if I told you that while those years are passing so quickly you could be saving to cover the expenses of higher learning in a tax-advantaged way? Knowing that even if you “blink” a few times your child will have a great start to paying for college is very reassuring for parents!
I know that saving for college can seem scary and overwhelming; the reality of day to day life is that we all have a budget to stick to. Fitting in college savings can seem impossible because we are trained to think that it requires a big financial commitment. That is why I wanted to talk to you about 529 college savings plans today and to tell you why it makes sense for my family and likely yours too.
First, saving for college can start as early as upon birth, or as late as the teen years. Every situation is different, but we all want the same things for our kids; the pursuit of happiness, the tools they need to develop skills, and the opportunity to get an education without large amounts of debt. No matter what stage your family is in, a 529 college savings plan can help accomplish those basic desires for our children.
Saving a small amount a month, like $50 or $100, is a way to establish college savings without destroying your budget. You could deposit that money in a traditional savings account, but it would not draw much in interest. 1% is the average rate for a standard savings account. If you saved that same amount in a 529 college savings account, you would be drawing 7% interest, which is something to laugh all the way to the bank about! Over 18 years the interest alone is worth about as much as your original investment!
It is, of course, advantageous to start your 529 college savings plan early, as the longer your money can earn tax-free interest, the better.
Now that you know why a 529 College Savings Plan makes for a smart way to save and grow a college fund without tax penalty, let me tell you what a 529 covers and why they are great savings plans for families.
529 College Savings Account is great for families with multiple children. Life is unpredictable. We want to plan for all of our children to attend a great college, but there is no guarantee that will happen. Being able to change beneficiaries on a 529 account without penalty means that you can invest in the future without stressing about the future. It is great to know that any leftover or unused amounts can be applied to another child or even a grandchild!
Qualified expenses include tuition, supplies, books, general fees, room, and board. This applies to colleges and universities both in and out of state, private schools and even some technical based schools. This doesn’t mean that your college fund cannot be used in other ways, but it does mean that expenses that don’t fall under those listed criteria, you are subject to a 10% penalty.
However, should your child be awarded a scholarship, that amount may be withdrawn without penalty or taxation. Meaning that if you have been saving for years, and your child has earned a scholarship, you can spend that money elsewhere if needed!
Saving for college doesn’t have to be scary, or overwhelming. With a basic budget and a 529 College Savings Plan you can take smart steps to giving your children the funds they need for college without the need for student loans.
How are you saving for college? Are you using a 529 Savings Plan or a traditional savings account? If you have tips or insights to share with other parents that are planning for the future, make sure to leave a comment!