Parents: What You Need to Know About College Savings and 529 Accounts
Are you concerned about the rising cost of tuition, wondering how you are going to save enough money to put your kids through college? It is a big responsibility to pay for higher education, and many parents are overwhelmed at the idea of paying for their child’s tuition. Don’t worry, because if you are strategic with your financial planning, it is possible to have the money ready when your child is old enough to register for college.
Talking with a Financial Advisor
One of the best things that you can do is talk with a financial advisor who can guide you with your financial plan. Your advisor will make recommendations with two goals in mind:
- Leveraging investments and savings accounts to maximize your return
- Utilizing tax benefits to minimize the amount of income tax that is due each year
Certain types of college savings accounts can help with your tax burden because there are tax credits available when you deposit money into these accounts. Talk with a financial advisor and you will see that it is possible to save thousands of dollars on your tax bill because of your 529 contributions.
The best method for college savings is to start early, because you will be able to leverage the saved money in order to get the maximum return on your savings and investments. Make sure that you are choosing the right types of investment plans, though, because you need to have the money available within the two- to four-year window when your child will be attending college.
Consider the risk, because you won’t have the flexibility to sit on the investment if the markets are changing when your child is in school. Your financial advisor will be able to help you choose the right opportunities so that you can be sure that your money is available and ready at the right time.
What Is a 529 Plan?
One effective way to prepare for the costs of college is by contributing to a 529 plan. These educational savings plans are designed for parents like you: people who are looking to maximize their investment and minimize tax burden while preparing for future educational costs.
These savings plans were created in 1996, and they have grown in popularity because of the many benefits that are available. The money that is set aside in the 529 plan can be used at any college, regardless of the state where the college is located.
An advantage to a 529 plan is that you will be able to retain control of the money, which allows you to call the shots when it comes time to use the funds. Many parents like the idea of managing the withdrawals that are taken out to ensure the money is being used for educational purposes.
Leveraging Other Resources on Campus
In addition to setting aside money for your child’s education, you should also consider other methods that can be used to reduce the amount of money that you will need to pay. Scholarship funds and various types of financial aid might be available to offset your out-of-pocket costs.
Learn about these options by talking with the financial aid office located on campus. When your child visits the campus for the new student tour, it is a good idea to schedule a meeting with the financial office so that you can discuss the many options that might be available.
You should talk with the financial office about the Expected Family Contribution (EFC), which will provide you with an estimate of the amount of money that you will need to pay for your child’s education. This calculation affects your child’s federal student aid eligibility, and you need to consider these factors when establishing your savings goal for the college accounts.
Are you interested in learning more about college savings plans and other types of personal investment accounts? Contact us today, and we will be available to answer your questions and help you choose the right financial plan for your individual needs.