An America Saves Guide to 529 Plans
Planning ahead for your kids' education expenses (or grandkids, or nieces, or nephews!) is a great way to pave the way for a higher education experience that is within reach, where your little ones can experience higher education without worrying about the potential financial burden that often comes along with that dream.
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Planning ahead for your kids' education expenses (or grandkids, or nieces, or nephews!) is a great way to pave the way for a higher education experience that is within reach, where your little ones can experience higher education without worrying about the potential financial burden that often comes along with that dream. And planning ahead for such a big financial goal might seem a little overwhelming, but we’re here to help!
Setting a goal to plan for your family member’s higher education is a great place to start, and once you’ve set the goal it’s time to decide where you’ll be saving to make that dream a reality - that’s where the 529 plan comes in!
According to the Securities and Exchange Commission, a 529 plan, also known as a qualified tuition plan, is a tax-advantaged savings account designed to help families save and invest for future education expenses. These plans are sponsored by states, state agencies, or educational institutions, and offer individuals a flexible and effective way to save money for qualified education expenses such as tuition and fees, books, and housing.
One big advantage of using a 529 plan is the potential for tax-free growth! This means that the longer your money sits in your account without making withdrawals, the more you’ll earn over time. Even better? This money can be withdrawn tax-free when being used to pay for qualified education expenses. This highlights the importance of using a 529 plan early, so the money that you save will have the potential to grow long before your loved one is ready to embark on that exciting new adventure.
Paying For Education Can Be A Family Affair! 529 plans can be a valuable tool for parents, grandparents, aunts, uncles, or anyone looking to save for higher education costs and provide a solid foundation for a child's educational journey. In fact, some consider contributing to their loved one’s 529 plan in lieu of traditional gifts, because little contributions over time add up. We’re not telling you how to spend your money (we love gifts!) but it’s nice to know you have options when looking to give financially to the young folks in your life. To learn more about gifting contributions to your loved one’s 529 plan, check out this resource from the College Savings Plans Network!
Another benefit of using a 529 plan is the wide range of qualified educational expenses available. You might be thinking that these funds can be used for tuition and fees, and you’re right! But these funds can also be used to purchase books, school supplies, additional equipment that may be needed for educational purposes, and even housing costs. The flexibility available with the eligible expenses allows families to make the most of the money they’ve saved.
Ready to get started? If you think opening a 529 plan is the way to go, a great place to start is locating the 529 plan (or plans) available to you! You can do this by visiting the College Savings Plans Network’s Find My State's 529 Plan. Reviewing the options available in your state is a great place to start, as there are likely more incentives for choosing your state’s plan. Keeping this in mind, you are actually free to choose a plan from any state that you’d like, so using this Search and Compare Tool is a great way to review plans from multiple states, and choose the option that best suits your needs. It’s also important to note that the funds from your 529 plan of choice can be used for an eligible school in any state.
Whether you're a parent, grandparent, aunt, uncle, or anyone looking to contribute to a child's educational journey, a 529 plan provides an effective and flexible way to save for their future. We always say start small, think big! So by making little contributions over time, you can provide a solid foundation for their educational experience.
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