Do Your Kids a Favor and Open a 529 Plan


529 college savings planHave you heard of 529 college savings plans?   If you’re a parent then you need to read this article.   A 529 plan could be one of the decisions your kids will actually thank you for in the future.   With skyrocketing tuition costs, it’s getting harder and harder to pay for college at the time of college.

Very few people know this but the government offers a special savings account called as 529 college savings plan.   They are typically offered through your state and vary when it comes to investing options and benefit.

The 529 plan is modeled after a Roth-IRA account in the sense that the money you invest into a 529 plan is post-tax money and grow tax free for the remainder of its life.   This means that all the money you place into a 529 plan can grow with the market and you will never pay taxes on those gains.   How cool is that?

The only real difference is that a 529 plan has to be used strictly for college related expenses.   So, you can’t pull the money out ten years from now and buy yourself a brand new BMW.   The government already allows that with a Roth-IRA account, they’re not about to offer a second account!

Benefits of a 529 plan

-Your investments grow tax free and never see Uncle Sam ever again!

-A wide array of investment choices offered through your state.

-Typically, 529 plans offer low management fees.

-Anyone can contribute money to a 529 account.

-Funds can be used at any college across the United States and abroad.

-Easy access through your state’s 529 website.

-High maximum contribution limits (this varies by state).

A benefit for your kids

Now, this article is not promoting for paying for your child’s tuition!   In fact, I encourage all parents to have their kids still pay their way through school. My parents made me do it and I’m grateful they did, I learned a ton and gained valuable money management skills.   I even graduated college with zero debt!

What I AM saying is that as a parent, you have the ability to use tax free growth to use for future college expenses.   You can still have your kids pay you for college tuition; it will just be replacing the 529 funds.   You can even lock in tuition rates with pre-paid tuition plans so if your kids do pay you back for tuition, they are paying the price you locked in years in advance.

Opening a 529 plan is truly a win-win decision.   You can’t go wrong with investing your money in this type of tax free growth account.

I plan on opening a 529 plan for all of my future children and ensuring they pay the least amount possible for tuition!   Although they will be paying their way through school, I can do my due diligence and get them the lowest tuition rates possible while watching my money grow tax free until I pull it out.

So, are you sold?   Comment below if you have questions or have a 529 plan and enjoy seeing the money grow tax free!

photo by inalaf

Written by Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER
and FACEBOOK
. Happy investing 🙂

Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER and FACEBOOK . Happy investing 🙂

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