Paying for college is something that can strap both students and parents for cash. Whether you’re going to college in state, out of state or planning on attending a community college, education is expensive. Many parents are looking for the best option to afford the costs. For those parents that might be planning ahead, there are 529 Plans available to help and have been since 1996. These plans are in place to help you pay for your child’s college education and receive some tax breaks and other incentives. There’s not a lot of attention given to 529 Plans so many people don’t know they exist.
529 Plans come in a variety of shapes and sizes so it’s important to know what you want before trying to pick one. One of the things you need to consider is how much you can afford to invest. Set a budget and stick with it as far as your investment. You can make the decision if you want to invest monthly or once per year and some families might even ask that the child help contribute if they are old enough to work since this is for their education. Younger children can also help contribute by giving a portion of their allowance. This will help them appreciate the importance of a college education at a young age.
One other consideration to think about is if you want to manage the 529 Plan yourself or pay a financial planner to do it. This option will really depend on how involved you want to be. If you pay a financial planner, you don’t have to do the research for the plan and you will be working with someone who is familiar with the tax rules. Unfortunately, the financial planner route also comes with transaction fees and paying to have the fund managed.
Probably the most important part of choosing a 529 Plan is figuring out what you want to get out of it. Some of the elements to consider are if you want a plan that others can contribute to, do you want a plan that has a minimum investment and do you want a plan with less financial risk as your child gets closer to college age.
If you are thinking of sending your student to an in-state college, you might consider a Pre-Paid Tuition Plan. This is great because you can lock in today’s tuition rates, but use them later when your child is ready to attend college. With tuition rates rising yearly, this option will possibly save you thousands of dollars. The most important thing to be aware of is that 529 Plans are available and can be very helpful to paying for your child’s college education no matter what type of plan you decide to go with.