If you want to start saving for your kids’ college education, options like traditional 529 savings accounts are available.
As a parent, you want to provide your children with the best opportunities possible. This includes a college education for some kids, while others dream of starting their own businesses. Planning for your child’s future includes finding the right savings plan for you and your family.
Exploring your options and learning more about the plans is always a good idea. You need to know the details of each plan before making an informed decision, as what works for one family isn’t always the best option for the next. Exploring different saving plans will help you determine the best way to save your children’s futures.
Help your kids manage their money while rewarding them with the Acorns Early (formerly GoHenry) debit card and app.
Greenlight offers a debit card for kids that you fully manage as a parent through a convenient mobile app.
Save. Invest. Earn rewards. And help your children achieve their future financial goals.
529 Savings Account
Named for the Section 529 of the Internal Revenue Code (IRC), the 529 savings plan is a way for parents to save for college in a particular state. This plan can be used to pay for college, partial tuition for children still in K-12, and computers. However, these plans are run by each state, and not all states offer them. Using these funds to pay off student loan debt and the costs of an apprenticeship is also possible.
With a 529 savings account, there isn’t a maximum amount of money that you can save per month or year. However, only $10,000 a year can be applied towards private school tuition for children K-12. Establishing a 529 savings account online or through your financial advisor is easy. However, you need to check the rules specific to your state.
How a 529 Savings Account Works
By placing money into a 529 savings account, you don’t pay taxes on the income you used to fund it. As long as the funds are used for education, you won’t need to pay federal taxes on the money when you take it out to pay for college or tuition. In addition, you can open an account for your children or grandchildren.
You might, however, need to pay state taxes on the funds even when you’re using them for education. So it’s always a good idea to ask an expert in your state before opening this account.
There aren’t limitations on the amount of money you can invest each year, but there are some disadvantages to choosing a traditional 529 savings account. Here are some things to consider:
Help your kids manage their money while rewarding them with the Acorns Early (formerly GoHenry) debit card and app.
Greenlight offers a debit card for kids that you fully manage as a parent through a convenient mobile app.
Save. Invest. Earn rewards. And help your children achieve their future financial goals.
Restrictions and Disadvantages of 529 Savings Accounts
Like any other savings plan, there are always restrictions and disadvantages you need to consider before moving forward. Here are a few of the disadvantages:
- It is not available in all states.
- The rules and restrictions may vary by state.
- It can only be used for educational expenses and changes based on college and K-12.
- You lose your tax benefits if you opt to use the funds for anything other than education or repayment of student loans.
- It limits your investment options.
- Excessive fees eat into the savings.
- Finally, the person who owns the account can change the beneficiary at any time.
While there are some significant advantages to selecting a 529 savings account, these restrictions and disadvantages must be considered.
Help your kids manage their money while rewarding them with the Acorns Early (formerly GoHenry) debit card and app.
Greenlight offers a debit card for kids that you fully manage as a parent through a convenient mobile app.
Save. Invest. Earn rewards. And help your children achieve their future financial goals.
