What Are 529 Plans?
There are many ways to pay for college. Some include applying for grants and scholarships, taking out loans, and other forms of financial aid. In this post, we want to make you aware of a common college savings option, the 529 Plan.
What is a 529 Plan?
529 plans are savings accounts that help you and your family save for future education costs, including college, elementary, and secondary schools. These plans are offered by individual states and come in two forms, the College Savings Plans and Prepaid Tuition Plans.
College Savings Plans are state-managed investment plans that gain interest on your contributions. The value will go up or down depending on the performance of the investment options. You’re able to make withdrawals from these accounts for different types of college expenses, including tuition, computers, and other school supplies.
Prepaid Tuition Plans allow you to prepay for all or some of the costs of college. This type of plan allows you to pay for tuition in the future at today’s cost. These plans are only accepted in a few states. Some private colleges also offer prepaid savings options that you can check out at privatecollege529.com.
Why should you invest in a 529 Plan?
Investing in 529 Plans can be a good option for families to help pay for college. They allow your money to grow toward education costs and provide interest, the profit from money invested in the account. Another benefit is that the interest from the account is not taxed.
When should you invest in a 529 Plan?
Families can start investing in 529 Plans even before a child is born. As an investment instrument, the sooner you invest, the larger the money in the account can grow.
If you’re interested in learning more about 529 Plans and how they can help pay for college, contact a financial advisor to create a college savings plan that is best for your family’s financial situation, and visit the resource provided by the U.S. Securities and Exchange Commission website which breaks down the specifics of 529 Plans.
To learn more about finding ways to pay for college, visit bigfuture.com.