The average yearly tuition for a public state college in the U.S. runs $9,139 with room & board, books & supplies and other expenses the grand total comes to $23,410 a year – a pretty hefty chunk of change! If you were to start saving when you child was born, and factor in the rising cost of education, you would need to put away $184 a month to cover the projected $78,619 needed to pay for a four year degree at a public university. It sort of makes your head spin doesn’t it? For that price, you could purchase two new vehicles or even a house in some states.
It’s an overwhelming number to consider and the task of saving efficiently over such a long period of time can be daunting. Luckily, states are making it easier for parents with 529 Plans. What’s a 529 plan you ask?
[infobox]A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.[/infobox]
Nearly every state now has at least one 529 plan available. It’s up to each state to decide whether it will offer a 529 plan (possibly more than one) and what it will look like, meaning 529 plans can differ from state to state, but there are basically two distinct types of 529 Plans.
- Savings Plans work like a 401K or IRA by investing your contributions in mutual funds or similar investments. The plan will offer you several investment options from which to choose. Like most investments, your account will go up or down in value based on the performance of the option you choose. You can see how each 529 plan’s investment options are performing by reviewing quarterly 529 plan performance rankings.
- If you would rather eliminate the risk altoghether, Prepaid Plans let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges.
Lets take at a look at my home state for example. ScholarShare, California’s 529 College Savings Plan allows you to use funds at schools across the nation (not just California). The Funds can be used for a variety of school supplies and needs – not just tuition! It is easy to open the account with an initial contribution of only $25 and all qualified earnings are tax free. Plus, there are no annual maintenance fee’s or income limits. Additionally, anyone can gift to an existing account which means grandparents, aunts or uncles can contribute too!
Since it’s National College Savings Month, ScholarShare is encouraging parents and guardians to take the College Savings Pledge. By taking the pledge, you will have the change to win a $500 ScholarShare 529 account for a child (ages 3-14) and a $500 Visa gift card for the child’s teacher. That’s a good chunk of change to get your college savings plan started! You can take the pledge in just 3 easy steps:
- Visit CollegeSavingsPledge.com
- Take the pledge and provide your contact information before September 25th for a chance to win!
- For an additional chance to win, once you sign the pledge, share it with your friends and family.
You can also find even more information on saving for college at CollegeSavingsPledge.com including facts and downloadable resources.
Five winners will be randomly selected on Sept. 4, Sept. 11,Sept. 18 and Sept. 25. The winners will be required to open a ScholarShare 529 College Savings Plan account with the awarded funds or contribute the awarded funds to an existing ScholarShare account for a California student between the ages of 3 and 14. The teachers of the student will also receive a $500 Visa gift card.
I am sharing this information as a ScholarShare Ambassador, however all opinions remain my own.
14 thoughts on “What You Need to Know About Saving For College With 529 Plans”
Saving for college is very important. I also appreciate that there is financial aide and student loans to help. College is a big investment.
What a great way to start saving. I know that we need to think about saving for our sons, thanks for sharing!
My husband and I have been talking about starting one of these for our youngest. I think it will really help in the future.
I wish I had saved for college. I’m swimming in student loan debt. I want to save for my kids but life is expensive right now lol…