By Rachel Biar, Deputy State Treasurer for Savings Programs, Nebraska
October 29, 2024
Saving for higher education expenses may seem like an overwhelming task for individuals and families alike. A few of the most common and fundamental questions we encounter are: How much should I save? Where should I start? Can my family help?
To help conquer some of these most pressing concerns, let’s talk about the top savings challenges you and your family may face—and tips to help overcome them.
“It’s hard to get started.”
Saving for higher education is an investment in the future, and I think you’ll be surprised just how simple it can be to get started with a 529 savings plan. 529 plans provide options for every level of investor. For most plans, there is no minimum amount needed to open a 529 account and there are no hidden fees you need to watch out for. Once you’ve opened your account, you will be able to contribute when it fits your budget schedule, and you will have access to your account giving you the flexibility to monitor your progress along the way.
“I don’t know how much to save.”
Mapping out a budget can help you get started and assist you with your savings goals. Additionally, most 529 plans offer a College Savings Planning Calculator. This tool provides savings projections tailored to your specific goals so that you can determine your contributions and save with confidence. One of the great benefits of saving with a 529 account is that you choose the amount to save in a way that best works for you while working toward your financial goals.
“I don’t have enough time.”
Life is busy, and we and our budgets often get pulled in many directions. When you feel overwhelmed, take a moment, and realize it’s never too late to start saving for education costs. Sometimes just starting is all you need to do. Begin saving as early as it fits into your budget and try to save as often as possible to be prepared for the expenses associated with higher education. Setting up an automatic monthly contribution is a terrific way to keep your savings goals focused.
“It’s hard to do it alone.”
With a 529 account, it’s easy for you to invite family and friends to join in your savings journey. Loved ones can help boost your savings efforts by using free online gifting services provided by your 529 plan or by using 529 gift cards. These options are user-friendly and typically do not require added fees. It’s okay to be transparent with friends and family members about savings goals. Don’t be afraid to ask loved ones to consider sending gift contributions for holidays, birthdays, and special occasions. You might be thrilled how happy they are to help you!
As the costs of higher education continue to rise, it can ignite fears for anyone. It is increasingly necessary for all of us to be aware of the diverse options available to finance educational expenses like tuition, room and board, books, supplies and more. For all those looking to pursue higher education, we are with you and here to help every step of the way. 529 savings plans are a useful and simple savings method offering easy enrollment, flexible contribution setup, tax advantages and ongoing account management.
Fear can have a significant impact on life and your financial success. Are you ready to defeat your higher education financing fears? All of us who work with 529 savings plans are here for you! We are dedicated to helping you make saving for college less scary, and we are here to help you continue working towards your higher education savings goals. Don’t let fear hold you back. Start saving with a 529 plan today!
About the author
Rachel Biar is Deputy State Treasurer for Savings Programs in Nebraska and serves as Past Chair of the College Savings Plans Network. In her role she serves as the Director for the NEST 529 Education Savings Program. The Nebraska Educational Savings Trust (NEST) provides four plans: NEST Direct College Savings Plan, the NEST Advisor College Savings Plan, Bloomwell 529 Education Savings Plan, and the State Farm 529 Savings Plan. The Nebraska State Treasurer serves as the Program Trustee. Union Bank & Trust serves as the Program Manager, and all investments are approved by the Nebraska Investment Council. Families nationwide are saving for college using the NEST 529 plans, which have $7.2 billion in assets and 300,000 accounts. Visit NEST529.com and treasurer.nebraska.gov for more information.
By Lael M. Oldmixon, M.Ed , Executive Director, Education Trust of Alaska
It’s October, and we must take advantage of every opportunity to make metaphors about sweets treats like the benefits 529 savers are reaping with updates to the IRS Tax Code and the FAFSA. The past few years have brought significant changes to education savings, especially with the updates to the FAFSA and the enhancements to 529 plans through the SECURE Act and SECURE 2.0. The changes have two significant benefits and address barriers that have spooked potential savers for years!
Changes to Free Application for Federal Student Aid (FAFSA).
The FAFSA has undergone a significant overhaul, simplifying the application process. The redesigned form is more user-friendly, with more straightforward instructions and fewer questions. The effort to improve the FAFSA process is one many in higher education hope will increase access to need-based and other Federal Aid.
The FAFSA Simplification Act (2022) also had positive takeaways for 529 beneficiaries. The Act, which went into effect in 2024, no longer considers 529 plans owned by friends, relatives, or grandparents as student assets in the Federal Aid calculation. Withdrawals from these accounts will no longer count as student income and won’t directly impact a student’s Federal financial aid eligibility.
Even though the impact was quite small before, this change has removed a barrier and area of concern for many grandparents, friends, and relatives who wish to help their loved ones save for future education.
Find more about the changes to the FAFSA at https://studentaid.gov/.
Changes because of SECURE Act 2.0
The SECURE Act of 2020 included two provisions that expand 529 allowable educational expenses, including student loan payments (with a lifetime cap of $10,000) and qualified apprenticeship program expenses.
In late 2022, Congress passed SECURE Act 2.0, which expanded retirement benefits and included an enhancement to the 529 plans: making rollovers of unused funds to a Roth IRA a qualified expense. 529 plan owners can roll over up to $35,000 of funds into a Roth IRA for the beneficiary. The rollover is tax- and penalty-free, meaning beneficiaries can avoid taxes and penalties for nonqualified withdrawals while boosting their retirement savings.
To find out more about Secure 2.0, visit https://www.savingforcollege.com/article/roll-over-529-plan-funds-to-a-roth-ira.
Savers who hope for more sweet changes to 529 plans in the future can rest assured that the superheroes at the Colleges Savings Plans network are advocating for changes that will make saving easier, expand accessibility for all types of educational pathways, and tackle the multi-trillion-dollar monster that is student debt in the U.S.
About the author:
Lael M. Oldmixon, M.Ed , is the Executive Director of the Education Trust of Alaska, which offers Alaska’s three 529 plans, Alaska 529, the T.Rowe Price College Savings Plan, and the John Hancock Freedom 529. She lives in Alaska with her spouse, two children, and two dogs.
By Trisha Good, Executive Director, Ohio Tuition Trust Authority
National Transfer Student Week, set for Oct. 21-25, 2024, focuses on the education journey of students who start at community colleges or trade or vocational schools and then transfer to a four-year college.
Not only is a community college a good way to transition from high school to a higher education institution, but starting at one can help families save more funds in their 529 accounts as the attendance costs are usually less expensive. Therefore, the number of credits a student can transfer from a lower-priced institution to a higher-priced one can significantly lower the costs of a higher education.
If you look at the national average price, a credit hour at a community college credit hour costs $150, while the average cost of a credit hour at a four-year public institution is $406. If your child earns 10 credit hours at a community college on required core classes that will transfer to other four-year program schools, the average cost would be $1,500. If your child took the same 10 credit hours of required core classes at a four-year college or university, the average cost would be $4,060. By taking the same prerequisite courses that will transfer to a four-year program, you could save $2,560 in your 529 account by starting at a community college.
Like saving for college, the key is starting the transfer planning process as early as possible. Once at a community college, your student should tell an academic advisor that they eventually want to transfer. With that information, they can choose courses that will completely transfer to the next college. And once your student knows where they want to transfer, they will need to contact their current school’s transfer office (usually in the registrar’s office) for advice on how to prepare. Then, they will also need to contact their future college’s transfer office for their recommendations and transfer policies.
Taking general education courses at a lower-priced community college is a smart way to save money in your 529 account and potentially have your student graduate early. If interested, contact your child’s home school’s transfer office to find out where the school has transfer agreements, and the courses guaranteed to transfer and apply toward their degree.
Prior Learning Assessments (PLA) can also gain your student transfer credits. PLAs evaluate a student’s learning outside of a traditional educational environment. Your student can earn college credits in one of two ways. One way is credit by exam, like tests created by the College Level Examination Process or CLEP. The other way is through a portfolio that contains a student’s applicable education learning. Members of the military and veterans can also turn their military experiences into credit. The American Council on Education (ACE) created college credit recommendations surrounding the Joint Services Transcript (JST), which the Army, Marine Corps, Navy, and Coast Guard use.
Transferring credits from a community college to a four-year program can reduce college costs and stretch your 529 savings funds. If you and your student are deliberate with your actions, and diligent in your research, the transfer process can work well for you and your college savings.
If you’d like to learn more about saving for your children’s future higher education, visit collegesavings.org or search for your home state’s 529 program.
About the author: Trisha Good is the executive director of Ohio Tuition Trust Authority. Since 1989, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 College Savings Program, CollegeAdvantage. Ohio’s 529 Plan oversees more than 676,000 accounts and over $17.6 billion in assets as of June 30, 2024. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.
By Pennsylvania Treasurer Stacy Garrity
October 8, 2024
Parents encourage their children’s interests from the time they’re small by enrolling them in school, running them to sports practices, signing them up for camps, buying supplies and gear, and so much more. There’s one more very important step that parents can take to help their child succeed no matter where life takes them: Saving for their future education with a 529 plan.
Whatever a child’s passion is when they embark on a career path after high school, they’ll likely need some type of training and education to help them realize their goals. Whether they head to a four-year university, community college, technical school, or begin an apprenticeship, 529 plans are an excellent tool to help save and pay for those opportunities.
It’s never too late to start but saving early and often with a 529 plan is one of the best ways to make future tuition bills less intimidating.
Confucius is credited with saying, “The man who removes a mountain begins by carrying away small stones.” That theory also applies to education savings. Every small deposit into a 529 plan can make a big difference years from now with the power of compound interest growth and time on your side. Saving this way can help the next generation get the training they need without a mountain of debt.
A recent survey of 6,000 Pennsylvanians revealed that families have remarkably high expectations for their children’s educational future. This was true across all incomes, races/ethnicities, education levels, and marital statuses. New parents typically want their child to attain more education than they themselves accomplished.
However, the findings suggest that parents who reported it was “too early to start saving” often had lower expectations for their children’s future education. No other measure in the survey was so consistently associated with lower parental expectations. Unfortunately, parents with that mindset will have saved fewer assets and be less able to afford the growing cost of college, which may result in self-fulfillment of their initial lower expectations.
The good news is that other research has shown that even a small amount of savings set aside for a child’s future education can positively impact the child’s own view of whether they are capable of pursuing education after high school.
To find the best savings options in your state, the first thing to look for is whether your state has a Children’s Savings Account (CSA) program like Pennsylvania’s Keystone Scholars. CSAs are a great way to get a jumpstart on savings. In Pennsylvania, every child born since Jan. 1, 2019, has $100 automatically set aside for their future education.
Next, check out your home state’s 529 plan. With 529 plans, families enjoy great tax benefits that aren’t available with other savings options. Families pay no federal income tax on investment growth, and withdrawals used for qualified expenses aren’t taxed. And in many cases, you’ll find additional benefits for in-state residents. Often, no state income taxes are owed on earnings, and many states even offer a state tax deduction or credit on 529 plan contributions. There may also be other great benefits; for example, funds in a PA 529 account don’t count against a Pennsylvania resident’s eligibility for state financial aid, and they aren’t subject to state inheritance tax.
If you want to dig even deeper, CSPN has an amazing 529 Search & Comparison tool to help.
We live in exciting times, and I believe the future is bright for the next generation of the American workforce. Technology and the world are changing at lightning speed, which means your child’s future career may not even exist yet. But you can, and should, start saving today to help them prepare.
529 plans have been around for decades, and they’re more important than ever for parents and grandparents who are looking to save for their children’s and grandchildren’s education. It’s never too early to start saving with a 529 plan to pave the way for your child’s future.
About the author:
Stacy Garrity is Treasurer of the Commonwealth of Pennsylvania and oversees the PA 529 College and Career Savings Program which includes two plans, the PA 529 Guaranteed Savings Plan and the PA 529 Investment Plan, which has earned a Gold Rating from Morningstar. Treasurer Garrity has cut fees multiple times for PA 529 accounts, saving families more than $16.5 million. PA 529 has assets of more than $8 billion.
James Diossa, General Treasurer, State of Rhode Island
September 24, 2024
September is College Savings Month! With the cost of higher education rising at an unprecedented rate, it’s never too early to start saving for your child’s future.
As someone who grew up in a working-class family, I understand the challenges that many people can face. My parents did not have the opportunity to attend college. They immigrated to Rhode Island, motivated by a dream of a better life for their family, worked endless hours in low-paying jobs, and instilled the value of education in me. However, they couldn’t put money aside for my higher education. I was on my own and had to rely on loans to pursue my college education.
After graduating from Central Falls High School, I attended the Community College of Rhode Island before transferring to Becker College. There, I was able to become the first in my family to receive a college diploma. While this was a very special milestone, with that diploma came with tens of thousands of dollars in debt that I continue to pay to this day.
This is why, as the General Treasurer of the State of Rhode Island, I want to ensure that a student’s dream of pursuing a higher education is not deferred by financial challenges.
Thankfully, with 529 plans across the country, families can save for their children’s future educational goals. These plans allow for families to save for education in an easy, flexible, and tax advantaged way. The money you invest into a 529 plan can be used for the cost of colleges, universities, trade and vocational schools, and even apprenticeship programs. These savings can be used for more than just tuition, room, and board. You can use your savings for other expenses like books, computers, and other related expenses. You don’t need a lot of money to get started. In fact, even setting aside a few dollars a month can make a big difference over the course of several years.
By using a 529 plan to invest in your child’s education today, you will be building a pathway to opportunity for them tomorrow. I urge you to visit https://www.collegesavings.org/529-search-and-comparison for more information.
About the author:
James Diossa is the General Treasurer of the State of Rhode Island. As General Treasurer and Chair of the State Investment Commission, he serves as the administrator of Rhode Island’s two 529 plans, CollegeBound 529 and CollegeBound Saver. Visit collegeboundsaver.com for more information on ways to save through a 529 plan.
Busting the biggest myths about 529s
By Ashley Durham, senior writer, my529
September 17, 2024
This just in — If you have extra 529 funds, why not send your furry friend to obedience school by leveraging the new 52k9*?
*In truth: 529 plans haven’t gone to the dogs — and “52k9” is not a qualified education expense. That means you can’t change your beneficiary to your good pup, either, though they are a member of the family (just not for tax purposes).
There are, however, several real misconceptions about what 529 plans are and what they can do, myths that plan representatives often encounter when speaking with community members and prospective account owners.
Myth: I didn’t open a 529 account when my child was a baby. It’s too late to get started.
It’s true that opening a 529 account when a child is young can give any contributed money the potential to grow over time. The earlier an account owner starts, the better, as they can maximize the effect of time on their savings. The next best time to open an account, though, is today. If a student is in junior high or high school, any funds set aside can still be put toward qualified education expenses. While the money they save may not pay for their education in full, perhaps they could cover a few semesters’ worth of books and supplies or room and board, in turn reducing the need for student loans. Saving — even small amounts — costs less than borrowing because of the interest required with repayment.
Myth: I don’t want my funds tied up if I have money left over in my 529 account.
529 plans provide flexible options for account owners if funds remain after a beneficiary completes their education. Account owners can change the beneficiary to another member of the family so that the new beneficiary could use the funds for their education. They can preserve a legacy account for the next generation, such as a grandchild. And now people can roll over unused funds to a Roth IRA for the beneficiary, with certain restrictions, a new option that has proven popular since it went live in January 2024. They can also choose to withdraw the funds with the awareness that the earnings, not their original contributions, are subject to taxes and penalties. Bottom line: The money in their 529 account is theirs, so they can determine the best course of action, consulting their tax advisor if necessary.
Myth: Why should I save? I worked my way through college and my kid can do that, too.
Many parents and guardians take pride in their experience of working their way through college with a summer or part-time campus job. They expect their child could do the same.
However, as tuition increases continue, that scenario becomes much less likely. For context, from a recent College Board publication, in 1993-94, the average published tuition and fees for public four-year colleges and universities was the equivalent of $5,380 today. In the 2023-24 academic year, the numbers for tuition and fees for the same institutions totaled $11,260. (Note: All numbers include an inflation adjustment.)[1]
Certainly, a student could work while attending college to offset costs, but their efforts may not yield the same results as the previous generation. Plus, balancing work hours with coursework could hinder grades or progress toward graduation. Funds set aside in a 529 account could make a marked difference toward completion of a certificate or a degree. Account funds could pay for some or all of a beneficiary’s education expenses, leaving more time to focus on their studies and lessening the likelihood of student loans.
Myth: My child will receive a scholarship, so they won’t need a 529 account.
Scholarships and financial aid can be vital components of a family’s educational planning. Consider the value-add of a 529 account: It could complement a scholarship, as the award amount may not pay for everything their child needs for their higher education experience. For example, if a scholarship covers tuition and fees, other qualified education expenses like room and board, books, supplies, and computers could factor in.
Additionally, if a 529 account’s beneficiary receives a scholarship, the owner of the account can withdraw 529 funds up to the amount of the scholarship without incurring a 10% federal tax penalty on earnings. (The earnings portion of the withdrawal, however, would be subject to federal and state income taxes.)
Myth: My child is more interested in pursuing a technical education, so 529 funds won’t work there.
Technical colleges, trade schools, and registered apprenticeships can be destinations for students and their 529 funds. As students have myriad options for postsecondary education, the term “college” has expanded beyond the traditional definition. 529 plans encompass a wide range of eligible educational institutions, including two-year and four-year colleges and universities, technical colleges and trade schools, graduate schools, and registered apprenticeships. Beneficiaries can use their funds close to home or across the country, as long as the school is eligible to participate in federal student aid programs.
Important Legal Notice
Investing is an important decision. The investments in your account may vary with market conditions and could lose value.
About the author:
Ashley Durham is a senior writer at my529, Utah’s educational savings plan. She was an educator at the secondary level for 17 years, where she taught Advanced Placement English Literature and Composition, among other courses, and wrote countless college recommendations for high school seniors. Ashley has a master’s in education from the University of Utah. She has been with my529 since 2015.
[1] Jennifer Ma and Matea Pender, “Trends in College Pricing and Student Aid 2023,” College Board, 2023, research.collegeboard.org/trends.
By Jessica Wetzel, Wisconsin 529 College Savings Program, Department of Financial Institutions
September 10, 2024
Being a grandparent is an exciting and fulfilling role. From babysitting and going on family vacations to being a pillar of comfort and support, you play a pivotal role in your grandchildren’s lives. You also have the unique opportunity to significantly impact your grandchildren’s future by contributing to their education savings. This gesture not only eases the potential financial burden of college but also inspires confidence and motivation for students, knowing that their family is behind them every step of the way.
One of the most common ways to save for higher education is with a 529 college savings plan. These tax-advantaged accounts offer tax-deferred growth, tax-free distributions when paying for qualified higher education expenses, and many states offer their taxpayers an income tax deduction or credit on contributions.
Even better is that grandparents can experience additional benefits when saving with a 529 plan, all while giving their grandchildren a gift that truly lasts a lifetime. As a grandparent, you can choose to open your own account for a grandchild or contribute to an existing account, likely owned by their parents. Each option is impactful and offers its own unique set of benefits.
Open Your Own 529 Account
When you open a 529 account and name your grandchild as the beneficiary, you can select your own investment options, receive quarterly statements, access the account online anytime, and eventually take distributions to pay for your grandchild’s tuition or other higher education costs. You can also feel confident that your grandchildren know that the funds saved are from you. And it’s okay if your grandchild already has a 529 plan; they can have multiple accounts opened for them.
The most significant benefit of choosing this route relates to your grandchild’s financial aid eligibility. In the past, money withdrawn from a grandparent-owned 529 plan was considered untaxed income for the student, which could have potentially reduced their financial aid package. Under the new Free Application for Federal Student Aid (FAFSA), distributions from a 529 account owned by grandparents are no longer counted as untaxed income for the student, meaning you can help pay for your grandchild’s education without harming their ability to receive financial aid!
Don’t live in the same state as your grandchild? No problem. Funds saved in a 529 plan can be used at any accredited school, not just those in your state or in the state where the beneficiary lives.
Contribute to an Existing 529 Account
Perhaps you’re just concerned with helping your grandchild pursue the college and career of their dreams, and less interested in managing a new account. If your grandchild already has a 529 plan set up by their parents or anyone else, you can easily contribute to that account for birthdays, holidays, and other special occasions or milestones. Some families even establish informal, matching contribution agreements where grandparents match any contribution a parent or student makes to the account. That way, contributions are doubled and can grow over time!
With this option, you don’t need to worry about opening the account, managing your investments, or taking distributions down the road when your grandchild starts their higher education journey. And even though you are not the account owner, you can still experience tax benefits, like a tax deduction or credit if you’re contributing to your home state’s plan, or if your state allows you to claim this benefit on contributions to any state’s plan.
The Gift of a Lifetime
By taking an active role in saving for your grandchildren’s education, you’re not just helping them financially; you’re demonstrating the importance of planning for the future. Setting aside even a modest amount of savings can be one of the most meaningful gifts you give them – one that will truly last a lifetime.
About the Author
Jessica Wetzel leads the Wisconsin 529 College Savings Program at the State of Wisconsin Department of Financial Institutions (DFI). In this role, she develops effective marketing and outreach strategies to increase awareness of the state’s two 529 Plans – Edvest 529 (direct-sold) and Tomorrow’s Scholar (advisor-sold) – by partnering with entities across the state on educating families on the importance of developing a higher education savings strategy. Before joining DFI, Jessica worked for over a decade in Wisconsin’s community and economic development sector. She successfully led and supported programs and organizations dedicated to helping low- to moderate-income individuals and families achieve homeownership, start small businesses, and join the financial mainstream.
Devon Copeland, Senior Communications Associate, Invest529
September 3, 2024
Do you ever find yourself having a chat… with yourself? Well, I do! Especially when it comes to big life decisions—like saving for college. A couple of years ago, I had one of these “talks,” and you know what? It actually helped! So, I thought I’d share that inner dialogue in case you’re also wondering, “Is saving for education really that easy?” Spoiler alert: Yes, it is. And with College Savings Month here, there’s no better time to start!
Me #1: Okay, self, we need to talk about saving for the kids’ education. We’ve been putting it off for a while now.
Me #2: Ugh, I know… But doesn’t it sound a bit… complicated? And expensive?
Me #1: That’s precisely why we need to get a handle on it now. And guess what—I’ve done some research. Turns out, a 529 account could make it a lot simpler.
Me #2: Oh, I’ve heard of those! But what makes a 529 account so special?
Me #1: Well, for one, it’s super flexible. You can use it for a wide range of educational expenses—like tuition, books, room and board, and even some K-12 expenses. Plus, it’s not just for traditional four-year colleges. Trade schools, apprenticeships, and even online courses are covered!
Me #2: Hold on. So, I can save now, and the kids can decide later whether they want to be doctors or auto technicians?
Me #1: Exactly. And here’s another cool thing: the money grows tax-free. So, every dollar we put in has a chance to grow more quickly over time without Uncle Sam taking a cut. When it’s time to use the money, we won’t pay taxes on the withdrawals if they’re for qualified expenses.
Me #2: I do like the sound of that! But how much do we need to start?
Me #1: That’s another great thing. You don’t need a ton of money to get started. Most 529 accounts let you open one with a small initial deposit, and then you can contribute as little or as much as you want, whenever you want. It’s totally up to us.
Me #2: Wait, so I could start with, like, $25?
Me #1: Absolutely, or even less! And we can set up automatic contributions to keep it going without even thinking about it. It’s like a “set it and forget it” situation, which is perfect because… well, let’s be honest, we always have a lot going on.
Me #2: That sounds manageable. But what if we don’t end up needing all the money?
Me #1: Great question. We can always change the beneficiary to another child or even to ourselves. Maybe I’ll finally take that pastry course in Paris!
Me #2: Ooh la la, now you’re talking!
Me #1: See? It’s really a win-win. Saving for education doesn’t have to be hard or scary. It’s all about getting started and doing what works best for our family.
Me #2: Okay, I’m convinced. This actually sounds easier than I thought. Let’s do it!
There you have it—my inner dialogue that led to some real savings! If you’ve been on the fence, maybe it’s time for you to have a little chat with yourself, too. Because with a 529 account, saving for education can be simple and rewarding. This College Savings Month, take the plunge. Your future self—and your kids—will thank you for it!
About the Author
Devon Copeland is the senior communications associate with Invest529. Invest529 makes education more accessible and affordable for families and individuals. The program is administered by Commonwealth Savers Plan, which oversees education 529 saving programs with more than $105.6 billion assets under management and 3.1 million accounts as of July 31, 2024, making it the largest 529 plan in the nation. For more information on Invest529’s education savings options, visit Virginia529.com or call 1-888-567-0540 to obtain program materials.
By Young Boozer, Alabama State Treasurer
August 27, 2024
Next month is college savings month. When I talk to folks about saving for college, usually the first thing they ask is, “When is the best time to start?” I like to immediately say, “at birth.” It gives you the maximum time to accumulate and grow your savings to the student’s matriculation day.
I advise them to take advantage of time. When your child arrives, put your young one in the budget. Plan to set aside regular contributions into a 529 program. Be diligent and consistent throughout the years to come. Fit it into your household budget. Look to increase the deposits over time as your financial situation improves. A monthly amount of $20, $50, or $100 can build dramatically over 18 years. Get started at birth.
The old adage is, “Time is money.” To afford college, let’s start a new saying. Money saved over time is more money over time. The college savings goal is to build our savings to avoid having to take out student loans. It is far better to save today than borrow tomorrow. Make today the day you start saving.
One is never too young to be the beneficiary of the magic of compound interest and the dollar cost averaging technique. Real early in life is the best time to persuade family and friends to make a gift of cash to a 529 account rather than a breakable toy for ALL the gift giving days.
The 529 plan has a glorious feature that allowed me to ensure I was saving for my grandson on the day of his birth. In expectation of imminent arrival, I opened and invested in a CollegeCounts529 in the great state of Alabama several months before his birth in his mother’s name. After his arrival and receipt of a Social Security Number, I changed the beneficiary designation to that lucky young man. He was earning from day one.
He’s off to a great start! You and your young one can be, too.
About the author:
Young Boozer is the 41st State Treasurer of Alabama, Chairman of Alabama’s Prepaid College Tuition Program (PACT); Alabama’s 529 college savings program, CollegeCounts; and the Alabama ABLE Savings Plan. He also serves on the CSPN Governance Committee. Visit treasury.alabama.gov for more information on ways to save through a 529 plan.
By Trisha Good, Executive Director, Ohio Tuition Trust Authority
August 13, 2024
Does your child’s upcoming school supply list seem to go on and on? According to a 2024 Deloitte report, most families expect to spend about $586 on school supplies this year. Before you head out to the stores or order online, check these savings strategies to reduce how much your family may have to pay to prepare for the new school year.
Save with what you already have
Being a smart shopper, most likely you’ve bought standard school supply items throughout the year when you found them at a good price, or at the end of last year’s back-to-school season when the supplies were on clearance. So, check around the house to see if you already have some of the required school items before you start to tackle this year’s supply list. Also, check your children’s backpacks to see what supplies they brought home before the start of summer. By using last year’s items that are still in good shape, and your school supply stock, you can cross off these materials off the list.
Save with other families
An adage says, “It takes a village to raise a child.” Many of your friends are in the same boat, spending a lot of money to prepare for their children’s new school year. Join forces with them to see if you can bring down everyone’s school supply costs. If someone finds a good deal on pencils, have them pick up extra for the group, and someone else can search for the best price on binders. Divide and conquer the supply lists and share the bounty with others. With multiple people searching for the best prices, the final cost should be lower for everyone. Also, check if your local online frugal friends, buy/sell/trade or free groups on social media have school supply items to share. If you have any extras, make sure to place them in these groups as well.
Save by sticking to the list
There are always supplies that catch your or your children’s eyes when shopping. Make a budget before going and stick to the teachers’ requested supplies list. Explain to your children that you are sticking to the budget so if they find another item that they want, then they are welcome to spend their own money on it. In addition, if you’re going to a store to shop, spend cash only. It makes it easier to stick to the list when you know that you have a set amount of funds on you.
Save with state sales tax holiday
Does your home state have a sales tax holiday weekend? If so, then take advantage of those tax savings and tie it in with back-to-school sales as well. You can then deposit those extra savings into your child’s 529 plan to continue supporting their education after high school.
The sales tax holiday is a great “money moment” to teach your children about delayed gratification. If you give your children a certain amount of dollars to buy their own school supplies, including clothes, then this can be a lesson on how to stretch their dollars. Look for the current prices of items for the upcoming school year. Next, figure out the state sales tax for these items. Then you can look to see if the stores will discount these items’ prices during the sales tax holiday. Therefore, if your child can wait for the sales tax holiday, then they can potentially save money two different ways—with lower prices and no sales tax. Together, you can figure out how much those savings would be so your child can see the real monetary benefit of waiting to buy the items. You can also talk about saving the extra funds in their 529 higher education savings account. You can add a little extra encouragement to save by matching the funds they add to their future education.
Save with Upromise
Many 529 programs have partnered with Upromise, a free rewards program that offers its members cash back as you shop online, dine out, buy groceries, and book flights and hotels. If you choose to shop for your children’s school supplies with Upromise, make sure you visit stores that offer financial incentives to shop there. Once you accrued the cash rewards, you can transfer those funds to your 529 account that has been previously connected to your Upromise account.
It’s never too late to save
If you haven’t started to save for college costs, visit CSPN’s website to learn more about 529 plans. Be sure to check out your home state’s 529 program first—as a resident, you may receive additional state income tax deductions or credit. Every dollar saved in a 529 account is a dollar that isn’t borrowed. This makes a 529 college savings plan an excellent alternative to student loan debt.
If you have been saving in a 529 plan, take these additional steps, add those savings to your 529 account, and watch how it grows! Even small 529 plan deposits can grow through the power of compound interest, tax-free earnings, and tax-free withdrawals for qualified higher education expenses.
About the author:
Trisha Good is the executive director of Ohio Tuition Trust Authority. Since 1989, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 College Savings Program, CollegeAdvantage. Ohio’s 529 Plan oversees more than 676,000 accounts and over $17.6 billion in assets as of June 30, 2024. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.