Saving for College:  Is a 529 Plan Worth It?

The decision to save for your children’s education is a personal one. If you are in the position to make this financial decision, you are likely doing well.

What is a 529 Plan?

A 529 plan is an investment account that offers tax-free earnings growth and tax-free withdrawals when the funds are used to pay for qualified educational expenses. This generally applies to college expenses such as tuition, books, and other fees, though can also be used for K-12 school tuition.

What Makes a 529 Plan Worth It?

The reasons below are what makes a 529 plan worth it to us. There are some people that are scared of putting money into a college savings account.

Ability to Receive Gifts

The ability to provide family or friends the assurance that their generous gift will go into an account specifically for college education is the biggest benefit of a 529 in my opinion.


Automatic Contributions and Investments

Most 529 plans also allow for direct deposit payroll deductions from your employer. We personally put $50 every paycheck into each of our kids’ college fund. While this doesn’t seem like much and likely won’t cover their college expenses, even these small contributions can add up to big dollars over time.


States Offer Tax Deductions or Credits

The nuances between the tax benefits of 529 plans can get complicated. Be sure to have a conversation with an accredited financial advisor or do your own research to find out which will provide the most benefit to you.


Tax-Free Growth on Investment Earnings

When you put your money into a 529 account you can rest assured that money will not be taxed when you withdraw for qualified education-related expenses. This is a significant benefit as the growth on earnings can add by the time you’re ready to ship your kid off to college.


Swipe up for more about  Saving for College: Is a 529 Plan Worth It?