With college tuition so high, it is important to think about saving well before the time comes. One way to do this is to open up a 529 savings plan. Many state or schools provide these types of saving plans for families as a long-term savings plan for college. The name comes from Section 529 of the IRS code.
There are several benefits for opening a 529 savings plan. One of the biggest benefits is the fact that your savings will grow tax deferred, and when the time comes to take out the money and pay for school, it is tax-free.
These types of plans are also very easy to maintain. Once enrolled, you can set up automatic deposits and then sit back and forget about it. The plan takes care of the investment part of the plan so you don’t need to worry about it throughout the years. The state treasurers office will actually be the one managing the assets in the plan.
Another important benefit to a 529 plan is that the donor, or the person who set up the plan, will always be the one who has control of the plan. Unlike other types of savings plans, the college student, or the beneficiary does not have any say in the how the funds are used.
Saving for college is something that should start when kids are young. If you do this, then you and your kids aren’t bogged down with college loans for years after they graduate.