There are many savings and investment vehicles to choose from when it comes to saving for your children’s college. They range from ESAs to CDs, and in some states, you can invest in a 529 savings fund. I have been confused and intrigued by the 529 College Savings Plans since I had my daughter, but have made it a goal to start one by April 2010 when her CD expires. I’m not clear what states these are available, but they are where I live in Colorado.
529 plans are more than just savings accounts. These state-sponsored college savings plans were established by the federal government in Section 529 of the Internal Revenue Code to encourage families to save more for college. They offer unique state and federal tax benefits you can’t get from other ways to save, making them one of the best ways to save for college. – College Invest
Benefits of 529 College Savings Accounts are Numerous:
- Possible state tax deductions from contributions
- Savings are tax-free
- High contribution limits
- Withdrawals and account options are flexible for your needs
Why not invest in something stable for my daughter and get a little help at tax time? Here’s a summary of what I’ve learned about what’s available and how to select a 529 College Savings Plan.
There are 4 plans to choose from. Some of the plans available, such as the one from Vanguard, offer a range of investment options for your funds with varying levels of risk. The main concern I have is that I would rather have a stable return with little risk, and have the tax incentives than have a volatile savings plan for my daughter’s education savings.
- Smart Choice College Savings Plan eFirstBank.com – Offers a money market and a 1 year savings option.
- Vanguard’s Direct Portfolio College Savings Plan – There are options for all risk levels, use their Risk Tolerance Allocation Tool to find out your level
- Scholars Choice College Savings Program – Offers a variety of investment options through Legg Mason Global Asset Allocation, LLC. and thier financial advisors only.
- CollegeInvest Stable Value Plus – A partnership with Metropolitan Life Insurance Company of Connecticut (MetLife) to offers a guaranteed fixed income college saving option
- Comparison of the difference between 529, Coverdell Savings ESAs, UTMAs and more for 2009. Compare College Savings Options. [PDF]
- CollegeInvest.org – Full Detail on the 529 Program Options
One thing is certain, don’t bank on your children getting a scholarship, start saving today. As parents we don’t have to do everything for our children, but what we can do makes a huge impact. I know it did for me, as the help my parents have given me has been invaluable.
Please note, this post is not to be considered financial advise. I do not take any responsibility for your investment or financial decisions. Please see my policy for more details.
UPDATE 3.29.2010: Yay! I finally opened and funded this account for my daughter through the College Invest website. It took me about 20 minutes to fill out the application, decide if I wanted to also enroll in the UPromise (shopping cash back that is directed and linked to your 529 account), and read over all of the documentation. I opted for the Vanguard fund after all, as I allocated a diverse mix of investment elections and plan to monitor it over time. I also set up a small recurring monthly transfer that will increase yearly by a certain amount. Progress!