If you are a parent with a young child, then you may be thinking about possible ways to save for your child’s future education. You want your child to have a quality education, but it must also be affordable. How will you save? A 529 plan could be your best option.
What Is a 529 Plan?
A 529 plan is an educational savings plan used to pay for a family member’s college education: from tuition and textbooks to room and board.
- 529 plans are operated by the states rather than the federal government, and thus vary slightly from state to state.
What Are the Advantages of 529 Plans?
- 1. Tax Benefits -- To encourage saving for education, most states will not tax your 529 savings. This means that you do not have to pay state income tax on your 529 savings, and any interest you earn is also tax free. When your beneficiary receives the money, it will also be dispensed tax free.
- 2. The Beneficiary Can Be Changed -- You decide who benefits from this account. It can be any family member, yourself included. If the original beneficiary does not end up going to college, then you can easily name another beneficiary in the family.
- 3. You Have Control -- For the most part, you get to decide when and to whom your money will be dispensed. This makes the 529 plan ideal for saving for a child’s education, which could require some flexibility.
- 4. Flexibility -- 529 plans can work for both in-state and out-of-state tuition, and can be used to pay for tuition at any accredited university, college, community college, vocational school, or trade school.
- 5. It’s Easy -- All you have to do is enroll and make your monthly payments (and even this can be done automatically). You don’t have to think about it until it’s time to use the money to pay for your child’s education.
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This article is published on KansasMoney.gov.
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