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How to Choose a 529 Plan

Updated on April 25, 2018
caseymel profile image

I have a Bachelors in Finance. I am a stay-at-home Mom, but my husband likes to call me the CFO (Chief Financial Officer) of our household.

529 Plan

Save Up For College!

Save Up For College!
Save Up For College! | Source

What Is A 529 Plan?

A 529 plan, also known as a College savings plan, is an investment in a child's future. You need to open one for each of your children since one 529 plan cannot be used for multiple children.

You can start a 529 plan with barely any money and put in as little or as much (within limits) as you would like. You could have family members put money in if they would like to also contribute.

The money that you put into your Child's savings account grows with interest over the years until they take it out for college.

If your child decides not to go to College or gets a scholarship, you can roll that money over to another child.

Start contributing to your child's 529 plan when they are babies.

Start contributing to your child's 529 plan when they are babies.
Start contributing to your child's 529 plan when they are babies. | Source

When To Think About A 529 Plan?

As soon as your child is born, you should be thinking about a 529 plan. The earlier you start a 529 plan, the more money your child will have when it is time to go to college.

Compounding interest makes the money that you put in early grow faster than the money you put in later since you are accruing interest on the interest.

Types Of 529 Plans

State 529 Savings Plans: Each state has several 529 plans to choose from.

You could live in Nebraska and sign up for a 529 plan in Alaska if you would like, then your child can go to a college anywhere in the United States. If you sign up for a State 529 plan, it does not tie you down to that state.

Prepaid 529 Plans: You can put money into a 529 Prepaid Plan to save up for in-state college fees. Once your child is old enough to go to college, they would need to go to the college covered by the prepaid 529 plan that you chose.

Look At The 529 Plans Your State Offers

Each state has several College 529 Savings Plans to choose from. If you choose a 529 plan from your state, you may get tax benefits.

I live in Virginia and we have Virginia 529 plans for our children. Since my son and daughter are a few years apart, they are in different Virginia 529 plans.

Each of their 529's are different because they have a different amount of time before they begin college.

The further they are from college, the more risky investments they have in their account. These accounts will have lots of stocks and few bonds.

The closer they get to college, the less risky the investments they will have. These accounts will have more bonds and less stocks.

529 Poll

Have You Started A 529 College Savings Plan?

See results

Studying At College!

Studying At College!
Studying At College! | Source

How To Choose The Right 529 Plan For You?

Tax Benefits - Each State's 529 Plans offer different Federal and State Tax Benefits. As we speak, Virginia has a great tax benefit, but only if you live in Virginia.

Time until child goes to College - Most 529 plans change over time to grow with the child, just like a targeted mutual fund. 529 plans contain stocks and bonds. The closer your child comes to College, the less risky the plan becomes. It may start off containing mostly stocks and end up with mostly bonds by the end.

Interest rates - Look at the long-term interest rates, especially if you start a 529 plan while your child is very young. Long-term interest rates will show you a more accurate rate than the shorter-term interest rates. The interest rates for stocks and bonds are constantly changing.

The Best 529 Plan Of 2018

New York's 529 College Savings Program -- Direct Plan is the number one 529 in the United States of America for 2018 according to Savingforcollege.com.

© 2013 Melanie Casey

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    • caseymel profile imageAUTHOR

      Melanie Casey 

      11 months ago from Indiana

      I would like to start a college fund for my 14 years.old daughter, and like to know how to go about it right away.

      I would start by looking at 529 plans for your state. You can sign up for any states 529 plan, but you will get more benefits if you sign up for your states 529 plan. Here is a website: http://howtosaveforcollege.com/home/find-your-plan...

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