As a parent, one of the greatest gifts you can provide your children is the ability to pursue higher education without taking on crippling debt. Even if your child lands their dream job right out of college, starting their professional career with tens of thousands of dollars in student loans puts them at a major disadvantage.
Fortunately, you can give your children the tools and assets needed to succeed by saving for their college education early. While there are many investment vehicles you can utilize, one of the most popular is known as a 529 college savings plan.
Whether you’ve already opened a 529 college savings account or are preparing to do so, the following information can help you leverage all the benefits of this plan:
1. You Can Invest in Multiple Savings Plans
The 529 college savings plan is one of the most versatile options out there when it comes to investing in your child’s higher education. However, you can supplement a 529 college savings plan with other investment vehicles in order to diversify your portfolio. This approach can be useful if your child decides to start their own business or explore non-traditional educational opportunities.
2. 529 Funds Can Be Used for K-12 Expenses
According to the IRS, 529 college savings funds can now be used to cover expenses to attend K-12 learning institutions, such as private or religious schools. The IRS’s new regulations for 529 college funds allow beneficiaries to use up to $10,000 per year to cover tuition, books, fees, supplies, and other expenses.
3. Shopping Around is a Great Idea
Contrary to popular belief, you don’t have to invest in an in-state 529 college savings plan. If preferred, you can invest in a plan that’s managed by an out-of-state financial institution or other oversight entity. While some states allow you to earn a credit on your state income tax for 529 contributions, others do not. If another state’s plan offers better investment opportunities or costs less, why not take advantage of these perks? This approach is especially beneficial if your state offers less-than-ideal tax breaks for investing in a 529 plan.
4. Changing the Beneficiary Is Allowed
When setting up your 529 savings plan, you’ll be required to name a beneficiary. However, you can always change the beneficiary in the future, if necessary. Specifically, the IRS allows you to change the beneficiary to either a sibling, yourself, or your child’s other parent. The new beneficiary can then use the 529 funds to cover approved educational expenses without incurring a tax penalty. Additionally, 529 funds can now be used to repay up to $10,000 of qualified student loans for both the beneficiary and their siblings, according to the SEC.
5. 529 Funds Cover Auxiliary College Expenses
Unlike some other college savings plans, 529 funds can be used to cover auxiliary college expenses. Examples include books, fees, equipment, and even room and board. This flexibility is one of the major reasons why 529 college plans are one of the most popular options out there.
529: A Flexible Choice
Even as you make wise choices to save for the future, you never know exactly what that future will bring. A 529 plan allows you to respond to whatever life throws at you, whether it’s your child’s entrepreneurial ambitions, a sibling’s college dreams, the perfect K-12 program, or any number of other surprises. Saving can give you peace of mind; a 529 vehicle can give you options.