There’s the Helicopter Mom and there’s the Worrier Mom. One thing we both have in common is how much thinking is involved. When I found out that I was pregnant with my first child, I was already looking into the best pediatricians in my neighborhood. By the time my daughter turned 1 years old, I was already looking into the best elementary schools in our district and now that she will be entering Middle School next year, you already know what I’m looking into right?
Well, maybe not High School … let’s take it a step further and think College!
We all can imagine the cost of college and even if you didn’t go to College, we all know someone who has graduated with so much student debt that they are STILL paying for it. As a Mom, this is not the kind of burden I want to place on my kids! my kids should be worry free! this is why setting up a 529 college savings plan can be an extremely effective way to save for your child.
What is a 529 college savings plan?
- It’s a type of investment account you can use for
higher-education savings. 529 plans are usually
sponsored by states.
Who can open a 529 plan account?
- Just about anybody can open a 529 account—parents,
grandparents, other relatives, friends—as long as he or
she is a U.S. citizen or a resident alien. As an account
owner, you’ll pick investments, assign a beneficiary, and
determine how the money is used. If you’re a New York
State taxpayer, you can also benefit from the state tax
How much can I invest?
- 529 account contribution limits are generally high—
from $200,000 to $300,000 or more, depending on
the state. For the Direct Plan, you can contribute up
to $375,000 on behalf of one beneficiary. This amount
includes all New York-sponsored 529 savings accounts
held for the same beneficiary.
Can 529 accounts only be used to pay for college?
- No. Your 529 account can be used to pay for qualified
higher-education expenses at any eligible educational
• Postsecondary trade and vocational schools.
• 2- and 4- year colleges.
• Postgraduate programs.
How can I use the money in a 529 account?
- You can use it to pay for anything that’s considered
a qualified higher-education expense, including
tuition; books; supplies; equipment; expenses for the
purchase of certain computer equipment, software,
and computer-related services; and certain room and
What makes these savings vehicles so powerful?
- Tax savings. Your earnings grow federally tax-deferred,
qualified withdrawals are tax-free,* and some states
(like New York) have other tax benefits as well.
Once you create a 529 account for your child, your friends and family can contribute funds using Ugift. For me, that means I can easily share my code on birthday invitations or holiday cards and insist that gifts be contributed to their future education and not their toy chest! makes so much sense right?
- There is no age limit for beneficiaries on a 529.
- 529 funds can be transferred to a close relative of the beneficiary if he or she doesn’t need the money.
- A beneficiary can have more than one account. For example, parents can open an account for a child and grandparents can open an account for the same child.
Compared to just putting your money away into your child’s saving account vs a 529 College Savings Plan, wouldn’t you choose the most effective way to save for your child? For the best plans in your state visit the links below.
College savings planner (tool): https://vanguard.wealthmsi.com/csp.php
529 state tax deduction calculator: http://www.archimedes.com/vanguard/stdc.phtml
*Disclosure: This is a sponsored post. As always, all opinions are of my own.