Sending your child off to college is an exciting chapter, but it can be an expensive one, too. Learn how you can reduce the financial strain of higher education with a 529 savings plan.
From selecting the right school and campus visits to the first day of classes, sending your child to college is an exciting new chapter. It can also be an expensive one. According to research conducted by College Board, the average student loan debt graduates carry is upwards of $30,000. In addition to entering a competitive job market after getting their diploma, many graduates face a mountain of student loan debt to pay back. To curb the financial strain and better position their children for success in the real world, many parents seek ways to set money aside for their child’s college expenses as early as possible. One way you can begin to prepare your child for college is with a 529 plan.
What is a 529 Plan?
A 529 plan is a tax-advantaged investment account and an effective way to save for and pay your child’s college education expenses. While there are different types of college saving plans, the 529 College Savings Plan is the most common. It allows you to make contributions, invest your money, and grow your savings tax-free. The only condition is you must use 529 plan funds for qualified educational expenses such as tuition, room and board, fees, supplies, and other required equipment when you’re ready to withdraw.
How to Start a 529 Plan
Some parents opt to begin saving in a 529 plan as soon as they welcome a new baby. While that may not be feasible for everyone, the key factor with 529 plans is that the earlier you start saving, the longer your money will grow tax-free for use down the road.
Most 529 plans are administered by state governments, except for a group of private colleges and universities that offer 529 prepaid tuition plans. California is one of 22 states that allows you to choose a plan sponsored by any state—and while you won’t get a tax deduction for your contributions, you can still enjoy the incentive of tax-free growth and other benefits. For more information on plan options and to compare benefits, visit the College Savings Plans Network.
Plan Ahead for the Future
It’s never too early to start preparing for the future. Expecting a child or simply want to start planning ahead? There are considerations to navigate when choosing the right 529 plan for you and your family, from where you reside and various investment options to how you’ll use the money once your child is college-ready. We recommend working with a financial advisor who can help you sort through your options to select a strategy that works for you. Learn more about how we help families prepare for the future and how you can fit a 529 savings account into your financial planning.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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