Let me start off by saying, we all know that one of the most important parts of being a parent is making sure that your child is well provided for. A large part of providing for your child is making sure that they get a good education. Which brings me to the topic of this post: funding your child’s education.
In today’s world, it’s becoming harder and harder to afford a good college education. The last thing you want is your 35 year old son or daughter sitting on your couch, flipping through different TV channels all day, eating all of your food, and sucking the life out of your bank account. So, it’s very important that you plan things out in a way that won’t bankrupt you but will still allow you to provide the best quality of education for your children so that they may be successful just like you.
Most parents, when they think of helping their child out with school, think of writing a check to help pay for tuition, books, etc. Well, rather than doing that, why not consider a 529 plan or some other kind of education-funding account?
A 529 plan allows you to put your money towards your child’s education. Not only is it being put solely toward that purpose, but it will also grow. On top of that, it’s tax free! The most common form of a 529 plan is called a college savings plan. This plan is an investment that covers tuition, room and board, any fees, books, computers, and other related materials. Another nice thing about these plans is that there are no age limits. This means that you can not only open one for a child, but for an adult as well.
529 plans can provide some great tax benefits. They are tax-free, meaning that they are exempt from federal tax as well as state taxes (as long as the funds are used solely to pay for college expenses).
The other form of a 529 plan is called a prepaid tuition plan. These are a little different. College savings plans have no state guarantee, but they can grow. A prepaid tuition plan, on the other hand, is generally guaranteed by the state, but cannot grow. A prepaid tuition plan mainly covers tuition and mandatory fees, and in some cases also room and board. Unlike the college savings plan, prepaid tuition plans do have age limits for the beneficiaries, and on top of that, have limited enrollment periods.
So, now you know some of the differences between the two types of 529 plans.
Regardless of which type of plan you choose, there are many benefits of helping your child pay for their education that you will be proactively making a difference in their life. You’re helping them understand the importance of getting a good education, all the while helping them pay for it. They will be grateful to you for both of these reasons.
Another monumental benefit is the fact that helping them could help you. More often than not, children that don’t get financial aid will end up dropping out or getting themselves deep into debt. If you do a good job at making sure that doesn’t happen, you’re also making sure that you aren’t paying their way once you enter retirement. On top of that, they may end up having to take care of you someday, so this ensures that they’ll be able to do so comfortably.
Being the catalyst in making sure that your child gets a good education ensures that you aren’t paying their way when they’re well into their adult life. It also ensures that when you retire, your money stays where it should: in your pocket!
If you have any questions regarding 529 plans, feel free to reach out to me. I’d be happy to speak with you.